Mortgage rates fell, reflecting investors’ concerns about uncertainty in the economy despite dramatic gains in the stock market.
In recent weeks, the mortgage rate has not followed typical patterns. Mortgage rates are tied mainly to 10-year Treasury bond yields. Typically, mortgage rates go down when investors’ confidence in the economy falters and they switch from stocks to buying safer 10-year Treasury bonds. When more people are buying bonds, the yields decrease – and therefore the mortgage rate drops. When fewer people are buying bonds, the yields are higher – and the mortgage rate rises.
But investors may be reacting to the inflation rate, which has risen to 2.5 percent in January from 1.4 percent a year before.
“The uncertainty in the economy is impacting all markets, not just the mortgage market,” said Sean Becketti, Freddie Mac chief economist.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average decreased to 4.10 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.16 percent a week ago and 3.64 percent a year ago.
The 15-year fixed-rate average dropped to 3.32 percent with an average 0.5 point. It was 3.37 percent a week ago and 2.94 percent a year ago. The five-year adjustable rate average fell to 3.14 percent with an average 0.4 point. It was 3.16 percent a week ago and 2.84 percent a year ago.
“The 10-year Treasury yield remained relatively flat this week, while the 30-year mortgage rate fell 6 basis points to 4.1 percent,” Becketti said. “Since the beginning of the year, the 10-year Treasury yield has covered a 22 basis point range. The range of movement for the 30-year has been half that, just 11 basis points.”
Meanwhile, mortgage applications increased last week, according to the latest data from the Mortgage Bankers Association. The market composite index – a measure of total loan application volume – rose 5.8 percent. The refinance index rose 5 percent to its highest level since December, while the purchase index jumped 7 percent.
The refinance share of mortgage activity accounted for 45.1 percent of all applications, its lowest level since November 2008.
(c) 2017, The Washington Post · Dion Haynes