Mortgage rates are stuck in a monthlong slide - Chicago Tribune

Mortgage rates fell for the fourth week in a row as long-term bond yields continued their extended slide.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average sank to 3.89 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.94 percent a week ago and 3.6 percent a year ago. The 30-year fixed rate has fallen 16 basis points in the past month. (A basis point is 0.01 percentage point.)

The 15-year fixed-rate average dropped to 3.16 percent with an average 0.5 point. It was 3.19 percent a week ago and 2.87 percent a year ago. The five-year adjustable rate average remained the same as it was a week ago, at 3.11 percent. It was 2.82 percent a year ago.

Mortgage rates tend to follow the path of long-term bond yields. As investors buy up bonds, sending prices higher, that drives yields down. The yield on the 10-year Treasury plunged to a seven-month low this week, slumping to 2.14 percent Tuesday. In less than three months, it has dropped 46 basis points from its peak this year at 2.6 percent.

“The 30-year mortgage rate moved in tandem with Treasury yields, falling 5 basis points to 3.89 percent,” Sean Becketti, Freddie Mac chief economist, said in a statement. “Mixed economic data and increasing uncertainty are continuing to push rates to the lowest levels in nearly seven months.”

Events here and around the world are having an impact on mortgage rates — the elections in the United Kingdom, testimony by former FBI Director James B. Comey on Capitol Hill and Gulf region countries cutting ties with Qatar, which raised tensions in the Middle East. Then there’s the near certainty of a rate hike at next week’s Federal Reserve meeting.

With the central bank likely to raise rates for the third time in six months, home loan rates should be trending higher, not lower. Instead, they appear likely to continue their downward course no matter what the Fed does next week.

Bankrate.com, which puts out a weekly mortgage rate trend index, found the experts it surveyed almost equally split between rates remaining relatively stable or falling in the coming week. Shashank Shekhar, chief executive of Arcus Lending, is one who says rates will move slightly lower.

“Slow yet steady movements in last few weeks have now brought the mortgage rates to their lowest level of the year,” Shekhar said. “There are several geopolitical news (events) in the coming week that could have a substantial impact on the rates. There is British election results, Comey testimony, European central bank policy decision and even a possible Fed interest rate hike. With such market-moving news in the mix, it is very difficult to predict mortgage rates, but I am leaning towards a slight decline.”

Meanwhile, mortgage applications surged last week as rates fell, according to the latest data from the Mortgage Bankers Association. The market composite index – a measure of total loan application volume – increased 7.1 percent. The refinance index rose 3 percent, while the purchase index grew 10 percent to its highest level since May 2010.

The refinance share of mortgage activity accounted for 42.1 percent of all applications.

“Mortgage application volume increased strongly coming out of the Memorial Day holiday,” said Joel Kan, an MBA economist. “With mortgage rates at their lowest level since November 2016, and the unemployment rate at its lowest level since May 2001, purchase application volume increased to its highest level since May 2010. Refinance activity bumped up as well in response to moderating rates, but remained generally subdued.”

The MBA also released its mortgage credit availability index (MCAI) this week, which showed lending standards tightened in May. The MCAI decreased 1.1 percent to 181 last month. A decline in the MCAI indicates that lending standards are tightening, while increases indicate loosening of credit.

“Credit availability slipped in May, primarily driven by investors consolidating their offerings for government insured loans,” said Lynn Fisher, MBA’s vice president of research and economics. “These decreases were partially offset by continued expansion among jumbo loan programs. The Jumbo MCAI has increased in 13 of the last 15 months.”

Mortgage rates are stuck in a monthlong slide - Chicago Tribune