The 30-year fixed mortgage rate, the most popular home loan
product, has been on a six-week slide, a downturn fueled by rising apprehension
about the pandemic.
According to the latest data released Thursday by Freddie
Mac, the 30-year fixed-rate average dropped to 2.77 percent with an average 0.6
point. (Points are fees paid to a lender equal to 1 percent of the loan amount.
They are in addition to the interest rate.) It was 2.8 percent a week ago and
2.88 percent a year ago. The 30-year fixed average has not been above 3 percent
since late June.
Freddie Mac, the federally chartered mortgage investor,
aggregates rates from around 80 lenders across the country to come up with
weekly national averages. It uses rates for high-quality borrowers with strong
credit scores and large down payments. Because of the criteria, these rates are
not available to every borrower.
The survey is based on home purchase mortgages. Rates for
refinances may be different. As of Aug. 1, borrowers refinancing their
mortgages will no longer have to pay the adverse market refinance fee. The fee,
which was imposed on mortgages sold to Fannie Mae and Freddie Mac, added about
$1,500 to a $300,000 loan. The surcharge was intended to offset covid-related
losses.
The 15-year fixed-rate average held steady at 2.1 percent
with an average 0.6 point, unchanged from the previous week. It was 2.44
percent a year ago. The five-year adjustable-rate average fell to 2.4 percent
with an average 0.4 point. It was 2.45 percent a week ago and 2.9 percent a
year ago.
“Investors are uncertain about how impactful resurgent
delta-variant covid cases will be, which is helping to keep rates low,” said
Danielle Hale, chief economist at Realtor.com. “Economic growth continued in
the second quarter, albeit shy of expectations. And while mask-wearing is
making a comeback thanks to CDC guidance and local advisories, health experts
don’t expect widely mandated lockdowns like we saw in 2020. This wait-and-see
approach tends to lead investors to favor bonds, which means lower rates in the
near term.”
Concerns about the spread of the delta variant seem to be
unsettling investors more than inflation. The yield on the 10-year Treasury
briefly traded at its lowest level since February earlier this week before
closing at 1.19 percent on Wednesday. Yields move inversely to prices.
Investors normally would be looking to shed Treasurys
because rising inflation erodes the value of bonds’ fixed payments. Instead,
bond buying continues apace. Last month, the yield on the 10-year Treasury fell
more than 20 basis points, the largest one-month decline since March 2020.
“The spread of covid’s delta variant has prompted global
investors to park money in safe investments that won’t lose value, said Holden
Lewis, home and mortgage specialist at NerdWallet. “Mortgage bonds are among
the safest places to stash money. As a result, the supply of mortgage money
exceeds the demand. That’s why mortgages are so cheap. There’s an excess of
money available to lend and a finite demand from mortgage borrowers.”
Bankrate.com, which puts out a weekly mortgage rate trend
index, found almost two-thirds of the experts it surveyed expect rates to go
down in the coming week.
“Rates may ease down slightly as variant concerns rattle the
Treasury markets while inflation talk is off to the side for the moment,” said
Gordon Miller, owner of Miller Lending Group. “Should this continue to remain
an issue it’s quite possible we retest the all-time lows.”
Meanwhile, mortgage applications dipped last week. According
to the latest data from the Mortgage Bankers Association, the market composite
index — a measure of total loan application volume — decreased 1.7 percent from
a week earlier. The refinance index and purchase index each dropped 2 percent.
The purchase index was down 18 percent compared with last year. The refinance
share of mortgage activity accounted for 67.6 percent of applications.
“Refinancing activity last week was close to year-ago levels
for the first time in months, which is a sign that more homeowners are acting
on mortgage rates that have now fallen below 3 percent,” said Bob Broeksmit,
MBA president and CEO. “Although lower mortgage rates are giving prospective
home buyers more purchasing power, low inventory and affordability challenges
continue to prevent sales activity from being much higher.”
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