Long-term bond yields fall unexpectedly, pushing mortgage rates to their lowest point in February.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed rate average fell to 2.9% this week. It was 2.98% a week ago and 3.03% a year ago. The 30-year fixed rate has been below 3% in six of the past seven weeks.
Freddie Mac, the federally chartered mortgage investor, aggregates the rates of about 80 lenders across the country to establish weekly national averages. It uses rates for high quality borrowers with strong credit scores and large down payments. Due to the criteria, these rates are not available to all borrowers.
The survey is based on home purchase mortgages, which means refinancing rates may be higher. The price adjustment for refinancing operations that took effect in December adds to the cost. The adjustment, which applies to all refinancings of Fannie Mae and Freddie Mac, is 0.5% of the loan amount. That works out to $ 1,500 on a loan of $ 300,000.
The average 15-year fixed rate slipped to 2.2%. It was 2.26% a week ago and 2.51% a year ago. The five-year revisable rate average fell to 2.52%. It was 2.54% a week ago and 3.02% a year ago.
“Mortgage rates fell this week, reaching their lowest level since the winter,” said Matthew Speakman, an economist at Zillow. “Despite broadly strong June employment figures, a booming stock market and broader signs that the economy continues to recover, investors continue to downgrade their very optimistic forecasts for economic growth. they did earlier in the year. This change in sentiment places downward pressure on longer-term Treasury yields and the mortgage rates they influence. “
Despite the June jobs report showing improvements in the labor market, the 10-year Treasury yield hit its lowest level since February this week, closing at 1.30% on Thursday. Wall Street analysts are baffled by the drop. Many have predicted that when the economy improves, investors will abandon bonds, causing yields to rise nearly 2% at this point. Instead, they fell.
The minutes of the Federal Reserve’s June meeting were released this week. They said Fed officials have started talking about cutting their bond buying program, which has kept mortgage rates low, but few seem keen to start the process. Although financial markets have reacted in moderation to the news, it is expected that when the Fed begins to cut back on its buying, it will cause mortgage rates to rise.
Bankrate.com, which publishes a weekly mortgage rate trend index, found that more than half of the experts surveyed expect rates to fall in the coming week.
Meanwhile, mortgage applications were down for the second week in a row, falling to their lowest level since the start of 2020.