Mortgage rates fell to their lowest level since
June 2013, as the jitters being felt in the stock and bond markets ripple
throughout the economy. U.S. government bond yields, which influence mortgage
rates, plunged as traders reassessed growth outlooks in Europe and fled to the
safety of the U.S. The benchmark 10-year Treasury dipped as low as 1.873% before reclaiming some ground.
Mortgage-finance company, Freddie Mac, said the average 30-year
fixed-rate mortgage had a rate of 3.97%, down from 4.12% the week before. This
week’s level was the lowest level tracked by Freddie since the week ended June
20, 2013, when rates averaged 3.93%.
Low borrowing costs, if they persist, could lead to a small
jump in applications to refinance mortgages, economists said, which would
provide support to lenders in a category that suffered after rates jumped last
summer.
If rates stay low, “it could spark a refi boomlet,” said
Mark Zandi, Moody’s Analytics chief economist, who said that he’d expect
mortgage rates of less than 4% to lead to about twice as much refinancing
activity as he’d expect if they were at about 4.5%.
But the effects are likely to be more muted than in the
past, because many people already refinanced their mortgages during a wave that
ended in 2013, after Federal Reserve officials signaled they would begin to
wind down their bond-buying stimulus program.
Christian Penner, a mortgage banker in West Palm Beach,
Fla., said that his firm had begun to send emails to
past clients encouraging them to look at refinancing. He said many homeowners
in his area didn’t qualify to refinance the last time rates were low, in part
because many owed more than their homes were worth. Now that home values have
recovered somewhat, some of those owners might look to refinance, he said.
A separate survey by the Mortgage Bankers Association found
that rates averaged 4.2% in the week ended Oct. 10, without points, a level
that was also the lowest since June 2013. The number of applications to
refinance that week was 11% higher than the week before but down 27% from the
same week a year earlier.
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