For more than a month, mortgage rates have been in a free fall. Stock market volatility, global trade worries and the government shutdown are pushing rates down to their lowest levels since August.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average dropped to 4.51 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.55 percent a week ago and 3.95 percent a year ago. The 30-year fixed rate has gone down 43 basis points in less than two months. (A basis point is 0.01 percentage point.)
The 15-year fixed-rate average slipped to 3.99 percent with an average 0.4 point. It was 4.01 percent a week ago and 3.38 percent a year ago. The 15-year fixed rate fell below 4 percent for the first time since early September. The five-year adjustable rate average slid to 3.98 percent with an average 0.2 point. It was 4 percent a week ago and 3.45 percent a year ago.
“Low mortgage rates combined with decelerating home price growth should get home buyers excited to buy,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “However, it will be interesting to see how the recent turmoil in the stock market will affect home-buying activity in the coming months.”
The yield on the 10-year Treasury sank to an 11-month low Wednesday, drifting down to 2.66 percent. Investors worries about global growth and the government shutdown are moving their money into safer assets such as bonds, which is driving bond prices higher and causing yields to fall. The yield on the 10-year Treasury has plummeted from a high of 3.24 percent in less than two months.
The movement of long-term bonds, particularly the 10-year Treasury, is one of the best indicators of where mortgage rates are headed. When yields fall, rates tend to follow.
Earlier this week, LendingTree released its Mortgage Comparison Shopping Report that found 70.3 percent of purchase borrowers received mortgage rates under 5 percent last week.
But Friday’s employment report could cause rates to reverse course, especially if it comes in better than expected.
“Strong jobs and wage growth data could easily slow the lower movement in rates and provide optimism that the economy is still on strong footing,” said Aaron Terrazas, senior economist at Zillow.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that half of the experts it surveyed say rates will go down in the coming week. Michael Becker, branch manager at Sierra Pacific Mortgage, is one who predicts rates will fall.
“I am surprised at the persistence of this rally in rates,” Becker said. “I wasn’t sure that rates could keep improving. But now I am a believer and think that markets are now focused on a slowing U.S. and global economy and that rates can continue to rally.”
Not unexpectedly, mortgage applications were down during the holidays despite falling rates. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — decreased 9.8 percent from two weeks earlier. (The MBA did not release data on loan application volume last week.) The refinance index fell 12 percent, while the purchase index dropped 8 percent.
The refinance share of mortgage activity accounted for 42.7 percent of all applications.
“Even with lower borrowing costs, both purchase and refinance applications decreased over the two-week holiday period, as both conventional and government applications dropped,” Joel Kan, an MBA economist, said in a statement. “Part of the decline in mortgage applications was possibly because of the government shutdown, as concerns over delays in FHA application processing times likely contributed to the weakness in activity.”