After hitting a four-month low, Mortgage rates took some baby steps up, however, they continued to hover around the same range they have been all summer, a report by Freddie Mac indicated.
The 30- year fixed- rate mortgage averaged 4.52 percent last week, a slight improvement from the previous week when it averaged 4.51 percent. The 30- year fixed- rate mortgage averaged 3.82 percent, the same week a year ago.
In a press release by Freddie Mac, Sam Khater, its chief economist said, “The 30- year fixed- rate mortgage barely inched up this week, continuing the summer trend of essentially being flat.”
He added, “While sales and price growth have softened these last few months, this leveling of rates may be helping more buyers reach the market. Purchase mortgage applications this week were once again modestly above year ago levels.”
Down 1 basis point from the previous week, the 15- year fixed- rate mortgage averaged 3.97 percent this last week. The same week a year ago, the 15- year fixed- rate mortgage averaged 3.12 percent.
At a 3.85 percent average, the five-year Treasury- indexed hybrid adjustable- rate mortgage underwent the most change, moving up 3 basis points. The same week a year ago, the five- year adjustable- rate mortgage averaged 3.14 percent.
“Mortgage rates drifted upwards over the past week as financial markets rallied on news that the United States and Mexico have agreed to the broad outlines of a new trade agreement,” Zillow’s senior economist, Aaron Terrazas said.
As Rates Slip, Weekly Mortgage Applications Decline
Potential homebuyers have been left frustrated this summer by weakening affordability, a factor affecting the entire mortgage market.
According to the mortgage Bankers Association’s seasonally adjusted report, total mortgage application volume declined 1.7 percent in the last week, and was 15 percent lower than a year ago.
The mortgage business should have been boosted be it by a small margin by a drop in mortgage rates, but unfortunately it wasn’t.
The market experienced a decrease in the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453, 100 or less) from 4.81 percent to 4.78 percent, the lowest it has gotten since the week ending July 20, with points increasing from 0.42 to 0.46 (inclusive of the origination fee) for those loans whose down payment is 20 percent.
Joel Kan, an MBA economist said, “Treasury yields were lower over the week, primarily driven by a release of FOMC minutes showing that Fed officials may be taking a more cautious approach to the final two expected rate hikes of 2018.”
Last week the market experienced a decrease in applications to refinance a home loan by 3 percent from the previous week. These applications are highly rate-sensitive. At 33 percent, volume was lower annually, with interest rates considerably lower a year ago.
Home purchase mortgage applications also declined, falling 1 percent for the week. Despite the fact that volume was 3 percent higher than it was the same week a year ago, it should have been even better due to an improvement in the economy and demand being stronger.
The pain in the neck, however, is home prices. Many buyers are pulling back because they can’t afford the highly contested for properties in most major markets. Home prices are continuing to raise although the pace has slowed down in the last few months since some sellers are choosing to remain in the market longer. Throughout the nation, prices are not about to fall given the strong demand for housing.
Talking to CNBC’s “power lunch”, Aaron Terrazas, a senior economist at Zillow said; “Home value appreciation has slowed, but it’s still triple its historic pace and three times the rate of wage growth. It’s still a seller’s market and will continue to be unless there is dramatic shift in inventory or dramatic shift in interest rates.”
Mortgage rates were under pressure last week given the fact that the yield on the 10- year U.S. Treasury bond is rising. Mortgage rates loosely follow the 10- year U.S Treasury bond. Despite the fact that rates have been moving within a very small range during the summer, they are beginning to show signs of breaking higher.
Sources: CSNBC and National Mortgage Weekly