WASHINGTON -- U.S. long-term mortgage rates fell this week to their lowest level in three months, an inducement to prospective homebuyers in a haltingly recovering market.
Continued steep declines in the stock market pushed home-borrowing rates lower, although they remain much higher than a year ago. Mortgage giant Freddie Mac said Thursday that the average rate on the benchmark 30-year, fixed-rate mortgage dropped to 4.63 percent from to 4.75 percent last week. The key rate stood at 3.93 percent a year ago.
The rate on 15-year fixed-rate loans fell to 4.07 percent from 4.21 percent the previous week.
As mortgage rates have ended the year with declines, prospective buyers have been wading in. Mortgage applications in the week that ended Dec. 7 rose 1.6 percent from a week earlier, according to the Mortgage Bankers Association. Refinance applications increased 2 percent while applications for home purchases were up 3 percent.
After taking sharp losses at the end of last week, stocks have gyrated this week. The hour-to-hour changes reflect investors' nervousness over the health of the global economy. Economic growth is expected to slow next year, and the U.S.-China trade dispute and rising interest rates could make that slowdown more painful.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.
The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates.
The average fee on 30-year fixed-rate mortgages was unchanged this week at 0.5 point. The fee on 15-year mortgages rose to 0.5 point from 0.4 point.
The average rate for five-year adjustable-rate mortgages fell to 4.04 percent from 4.07 percent last week. The fee held steady at 0.3 point.
Mortgage rates haven't risen in more than a month as the financial markets have been racked by concerns over U.S.-China trade relations, the United Kingdom's exit from the European Union and slower economic growth. Investors have been moving their money into safer assets such as bonds, causing yields to fall. The yield on the 10-year Treasury bill declined to 2.85 percent Thursday, a drop of close to 40 basis points in one month. (A basis point is 0.01 percentage point.) Because mortgage rates tend to follow the same path as long-term bonds, they also fell.
But the 10-year yield has started to head back up, climbing to 2.91 percent on Wednesday.
"Although we don't see it this week's data, momentum has started to shift and rates are likely lining up to resume their upward climb," said Danielle Hale, chief economist for Realtor.com. "A variety of economic indicators are coming in at good-but-not-great levels, from inflation, to job gains, to wage gains. At this point in the economic cycle, that's exactly what we want to see."
Next week's meeting of the Federal Reserve's Open Market Committee will shape expectations for the week ahead, said Aaron Terrazas, senior economist at Zillow.
"Markets expect another rate hike in December, but the committee's forward guidance will be more important for long-term rates," Terrazas said.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that almost half of the experts it surveyed say rates will rise in the coming week. Jim Sahnger, a mortgage planner at C2 Financial, disagrees. He predicts rates will hold steady.
"Volatility is the norm today," Sahnger said. "The reasons range from continued strife about trade, [the U.K. exit], inflation to the Fed, just to name a few. This month's data on inflation was tame with both [producer price index] and [consumer price index] within expectations. Eyes turn to the Fed meeting next week where Fed funds [rate] is expected to be kicked up .25 percent and then to Europe with Brexit talks and China as trade discussions continue. All this should be just enough to keep rates in check, for the week anyway."
Information for this article was contributed by Kathy Orton of The Washington Post and by staff members of The Associated Press.
Business on 12/14/2018