A strong demand for bonds typically sends mortgage rates lower. But this week, rates were stable.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average was unchanged at 3.60% with an average 0.5 point. (Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.) It was 4.53% a year ago.
The 15-year fixed-rate average ticked up to 3.07% with an average 0.5 point. It was 3.05% a week ago and 4.01% a year ago. The five-year adjustable rate average slipped to 3.35% with an average 0.3 point. It was 3.36% a week ago and 3.87% a year ago.
"Developments in trade discussions between the U.S. and China again took center stage this week, eventually pushing bond yields to multiyear lows after a dizzying stretch of sharp inclines and declines," said Matthew Speakman, a Zillow economist. "Surprisingly, the response from mortgage rates was relatively subdued."
The yield on the 10-year Treasury note fell to 1.59%, down 31 basis points since the beginning of the month. (A basis point is 0.01 percentage point.) It started the year at 2.66% and climbed to 2.79% before its descent.
"While Treasury yields have dropped like a rock, mortgage rates haven't seen the same benefit as investors have greater certainty in Treasurys as compared to prepayment risk that accompanies mortgage-backed securities," said Jim Sahnger, mortgage planner at C2 Financial in Palm Beach Gardens, Fla.
Mortgage-backed securities are investments in mortgages that have been bundled together. Most mortgage-backed securities are guaranteed by Fannie Mae or Freddie Mac.
"Concerned about early mortgage payoff in a falling rate market, investors started to stay away from buying mortgage-backed securities lacking an accurate way of forecasting life expectancy," said Dick Lepre, senior loan officer at RPM Mortgage in San Francisco. "The result has been Treasuries and MBS [mortgage-backed securities] moving in opposite directions on many recent days."
Mortgage rates usually follow the same path as long-term bond yields. But lately, home loan rates are charting their own course. Concerns about a looming recession have roiled the financial markets but so far have not affected the housing market.
"The impact of the last recession is fresh in our minds and can have a play in home buyer psychology," said Javier Vivas, director of economic research at Realtor.com. "But barring weak fundamentals, housing tends to perform fairly well during recessions. Over-construction is largely what got us into trouble last recession, and we've experienced just the opposite since then. ... Lower mortgage rates are giving a second wind to home buyers this summer and we're still expecting the lack of inventory, not the stock market, to be the main factor holding back home sales."
Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than half of the experts it surveyed say rates will fall in the coming week.
"Trade tensions and unrest in the financial hub of Hong Kong will keep markets on edge, with bond yields and mortgage rates remaining at multiyear lows," said Greg McBride, chief financial analyst at Bankrate.com.
Meanwhile, falling rates caused mortgage applications to soar. According to the latest data from the Mortgage Bankers Association, the market composite index -- a measure of total loan application volume -- increased 21.7% from a week earlier. The refinance index jumped 37% from the previous week, while the purchase index rose 2%.
The refinance share of mortgage activity accounted for 61.4% of all applications.
Business on 08/16/2019