Mortgage rates settle near historic lows as the purchase market begins to pick up

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Mortgage rates have held steady for the past three weeks, a remarkably calm period after early spring’s wild swings

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average crept up to 3.28 percent with an average 0.7 point. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 3.26 percent a week ago and 4.07 percent a year ago.

Freddie Mac, the federally chartered mortgage investor, aggregates rates from 125 lenders across the country to come up with national average mortgage rates. It uses rates for borrowers with flawless credit scores. These rates are not available to every borrower.

The 15-year fixed-rate average slipped to 2.72 percent with an average 0.7 point. It was 2.73 percent a week ago and 3.53 percent a year ago. The five-year adjustable rate average ticked up to 3.18 percent with an average 0.3 point. It was 3.17 percent a week ago and 3.66 percent a year ago.

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“Mortgage rates held steady near historically low levels this week,” said Danielle Hale, chief economist at “While purchase mortgage data showed week-to-week improvement — a possible sign of home buyer confidence gaining ground — [Federal Reserve] Chair [Jerome H.] Powell ignited fresh concerns with his comments about the potential for a long and slow road to economic recovery.”

Speaking in a video conference with the Peterson Institute for International Economics, Powell warned of a long, painful economic downturn if Congress and the White House do not act to stem the fallout from the novel coronavirus pandemic. U.S. financial markets sank after Powell’s remarks, with the Dow Jones industrial average shedding 517 points Wednesday.

Treasury yields also fell. The yield on the 10-year Treasury dropped back to 0.64 percent, the same place it started at in May. Mortgage rates typically follow the same path as long-term bonds, but that hasn’t been the case lately.

“No one knows where to invest their money because of the massive uncertainty generated by covid-19,” said Dick Lepre, senior loan adviser at RPM Mortgage in Alamo, Calif. “What we could see in the coming week is equity selling with money moving to Treasury and [mortgage-backed security] debt, which could lower mortgage rates.”

Although rates have been wandering upward lately, Hale predicts they will move lower in the future.

“Looking forward, while rates may rise from week to week, we expect the overall trend to be downward, with rates sliding below 3 percent by the end of 2020,” she said.

Some lenders are already offering sub-3 percent rates. HousingWire reported earlier this week that United Wholesale Mortgage, the nation’s largest wholesale lender, is offering rates as low as 2.5 percent. UWM doesn’t lend directly to borrowers but works with mortgage brokers who pass along the rate to their customers.

“Some people said we’d never see interest rates drop below 3 [percent] on a 30-year mortgage, but it’s now available when borrowers work with an independent mortgage broker,” UWM president and CEO Mat Ishbia told HousingWire., which puts out a weekly mortgage rate trend index, found nearly two-thirds of the experts it surveyed expect rates to go down in the coming week.

“Mortgage bonds seem to have found a bottom and are making a slight bounce higher off a critical support level,” said Elizabeth Rose, a certified mortgage planning specialist with AmCap Home Loans in Plano, Tex. Powell’s “comments of uncertainty and prolonged recession are helping bonds recover. Despite the market being flooded with new bond supply this week, [Tuesday’s] auction was met with renewed demand — a good sign for interest rates.”

Meanwhile, mortgage applications were flat last week even as purchase activity continued to pick up. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 0.3 percent from a week earlier. The purchase index rose 11 percent but was 10 percent lower than it was a year ago. The refinance index fell 3 percent but was 201 percent higher than it was the same time last year. The refinance share of mortgage activity accounted for 67 percent of applications.

“Mortgage applications increased for the second consecutive week, as states across the country gradually reopen and more prospective borrowers take advantage of record-low mortgage rates,” said Bob Broeksmit, MBA president and CEO. “The ongoing pandemic and subsequent decline in economic activity are impacting the housing market, but with purchase activity now up for the fourth straight week, home buyer demand is stabilizing.”

Posted by The Washington Post

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