Mortgage Rates Drop Lower Due to Market Fluctuation

Even though the 401 (k) plan hasn’t been performing so well in the past couple of months, those who are hoping to purchase or refinance a house have been placed at an advantaged position by the fluctuations of the stock market. Sources particularly report that the anxiety on the part of the investors have continued to push the rates of mortgage lower.

According to data recently released by Freddie Mac, the fixed rate average of about 30 years fell to 4.63% with about 0.5 points.  About one week ago, the average rate was 4.75% and about one year ago it was 3.93%.

The fixed rate average for 15 years fell to 4.07% with 0.5 points. About one week ago, it was 4.21% and one year ago it was 3.36%.  The average rate on a five-year scale dropped to 4.04% with an average point of 0.3. About one week ago, it was 4.07% and 3.36% about one year ago.

Data recently released by Freddie Mac showed that the fixed rate average of about 30 years fell to 4.63% with about 0.5 points.

Stagnant Mortgage Rates

The mortgage rates have remained at the same level for over one month. The unchanged position has been attributed to the general reaction of the financial market due to concerns about the trade relations between the U.S. and China, slower growth of the economy as well as Brexit.

Sources report that investors have been transferring their money to safer assets like bonds and that has led to a fall in yields. On the ten-year Treasury, the yield fell to 2.85% last Friday and the drop was nearly 40 basis points in just one month. Basis point refers to 0.01% point. Due to the fact that mortgage rates generally have a tendency to move in the same direction as long-term bonds, there was also a fall in mortgage rates.

Investors have started transferring their money to safer assets like bonds and that has, in turn, led to fall in yields

However, the decline may not be for so long as the ten-year yield has begun to climb back up again. As at Wednesday, it had climbed to 2.91%.  According to Realtor.com’s chief economist, Danielle Hale, although it wasn’t reflected in the data for last week, they have seen evidence that momentum has begun to experience a shift and there is also a likelihood that the mortgage rates are preparing to begin an upward climb.

Contributory Factors

Hale added that diverse economic indicators such as wage gains, job gains, and inflation are recording good, although not so great levels. At the current stage of the economic cycle, Hale noted that it is exactly what they have been expecting to see.

According to Zillow’s senior economist, Aaron Terrazas, the Federal Reserve’s much anticipated Open Market Committee Meeting is likely to contribute to shaping the market expectations. Terrazas noted that markets would likely experience additional rate hike this month, but the forward guidance to be offered by the Committee will be of more importance to the long-term rates.

Also according to Bankrate.com, nearly half of the various experts surveyed indicated that the rates will increase in this coming week. However, a C2 Financial mortgage planner, Jim Sahnger disagrees and predicts that the rates will likely hold steady.

The forward guidance to be offered by the Open Market Committee will reportedly be of more importance to the long-term rates.

Sahnger stated that volatility has become a norm in recent times. The reasons for the volatility range from the continued trade tension between the U.S. and China, inflation, Brexit, among other contributing factors. The inflation data for the month was at a tame level and both the CPI and PPI were well within expectations. Analysts and investors are patiently waiting for the Fed meeting which will hold this week. It is expected that at the meeting, the Fed funds will be upped by 25%.

Increase In Mortgage Applications

On the other hand, the falling rates are reportedly increasing mortgagee applications. According to the Mortgage Bankers Association, the market composite index, which refers to the calculation of the entire volume of loan application increased by 1.6% from one week earlier.

Also, refinance index climbed by 2% from the past week and the purchase index grew by 3%. Breaking down the statistics, refinancing shares of the total mortgage activity made up 41.5% of the entire applications.

According to the chief executive and president of MBA, Bob Broeksmit, the existing underlying demand for purchasing a home has remained robust as the year gradually proceeds to an end.

Despite the current affordability challenges, the purchase applications have still gone up as compared to what was recorded in the past week and one year ago. Over the period when the level of inventory continues to hold up, Broeksmit noted that purchase activity is also expected to remain substantially strong till the end of the year.