Although long-term U.S. Treasury notes rebounded this week after falling to nearly four-year lows, mortgage rates lagged in response.
Home loan rates typically follow the movement of the 10-year bond. When yields go up, mortgage rates go up. But even though the yield on the 10-year Treasury jumped 5.3 basis points Monday and continued to climb this week, home loan rates barely budged. (A basis point is 0.01 percentage point.)
As Britain voted Thursday to decide whether the United Kingdom will remain in the European Union – Brexit, as it is widely known – polls showed the vote could go either way. That uncertainty has unsettled investors. No matter the outcome, Brexit is likely to affect financial markets and, in turn, mortgage rates.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than a third of the experts it surveyed believe rates will rise in the coming week.
In the meantime, rates seemed to take a pause, according to the latest data released Thursday by Freddie Mac.
The 30-year fixed-rate average inched up to 3.56 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.54 percent a week ago and 4.02 percent a year ago.
The 15-year fixed-rate average rose to 2.83 percent with an average 0.5 point. It was 2.81 percent a week ago and 3.21 percent a year ago.
The five-year adjustable rate average was unchanged at 2.74 percent with an average 0.5 point. It was 2.98 percent a year ago.
“Mortgage rates have been slow to adjust to the 10-year Treasury yield, which has increased 12 basis points since last week,” Sean Becketti, Freddie Mac chief economist, said in a statement.
“The low rates continue to be good news for the housing market, as existing home sales rose 1.8 percent to a 5.53 million seasonally adjusted annual rate in the month of May – the highest level since February 2007.”
Mortgage applications, fueled by low rates, picked up this week, according to the latest data from the Mortgage Bankers Association.
The market composite index – a measure of total loan application volume – increased 2.9 percent from the previous week. The refinance index jumped 7 percent, while the purchase index fell 2 percent.
The refinance share of mortgage activity accounted for 57.7 percent of all applications.
“Driven by ‘Brexit’-related uncertainty and volatility, rates dropped 3 basis points last week to their lowest level since May 2013,” said Mike Fratantoni, MBA chief economist.
“The jumbo rate fell to its lowest level since MBA started tracking jumbo rates in 2011. The Brexit vote promises to bring continued volatility to markets this week, although the likelihood of an exit and its ultimate impact remain unclear.”
(c) 2016, The Washington Post · Kathy Orton