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Ingredients In Place For Mortgage Rates To Hit New All-Time Lows

Published on Tuesday - April 12, 2016

Homebuyers rejoice: the average rate on a 30-year fixed mortgage is now at its lowest level of the year, falling to 3.59 percent last week, according to Freddie Mac. It is now the third consecutive week mortgage rates have fallen as Federal Reserve Chair Janet Yellen’s recent monetary policy remarks continue to impact markets.

“It’s impossible to know how timing will play out, but I definitely see the ingredients in place for new all-time lows sometime soon,” said Matthew Graham, chief operating officer of Mortgage News Daily. “It actually concerns me how convinced I am that this will happen eventually.”

In a press release, Freddie Mac provided comparisons of new mortgage rates with last year’s low in February 2015:

  • 30-year fixed-rate mortgage (FRM) averaged 3.59 percent with an average 0.5 point for the week ending April 7, 2016, down from last week when they averaged 3.71 percent. A year ago at this time, the 30-year ARM averaged 2.83 percent.
  • 15-year FRM this week averaged 2.88 percent with an average 0.4 point, down from last week when it averaged 2.98 percent. A year ago at this time, the 15-year FRM averaged 2.93 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.82 percent this week with an average 0.5 point, down from last week when it averaged 2.90 percent. A year ago the 5-year ARM averaged 2.83 percent.

Factors behind the fall in mortgage rates can be attributed to an array of political and economic circumstances going on, including the trajectory of the global economy. Consumers and investors are worried about three factors: oil prices, concerns about a stock correction, and the race for the White House.

“You have the makings for quite the rate-friendly environment,” said Graham.

According to Senior Vice President and Chief Economist at Fannie Mae, Doug Duncan, the growing pessimism over the last three months about the direction of the economy seems to be spilling over into home purchase sentiment.

“The gap between the share of consumers who think the economy is on the wrong track and the share of consumers who think it is on the right track has widened, nearly matching its reading last August, when concerns regarding China and oil prices led to the biggest stock market plunge in years. In turn, we saw dips this month in income growth perceptions, attitude about the home selling climate, and job confidence,” said Duncan.

Between 2012 and the end of 2015, Freddie Mac reported the average mortgage rate 209 times during that span, with 40 of those reports (one-fifth) lower than they are now. In the last two years, mortgage rates have been above 4.09 percent only a quarter of the time. Rates unexpectedly fell to 3.59 percent on February 5 before rising, which led to more than 1.2 million borrowers to refinance in the first half of the year, according to Black Knight Financial Services.  When mortgage rates dropped this low in February 2015, the Federal Housing Administration (FHA) had just cut the insurance fees it charges on low-down-payment loans by half a percentage point.

“Low mortgage rates and a positive employment outlook should support a strong housing market in the second quarter of 2016,” said Sean Becketti, Freddie Mac’s chief economist.

On Monday, President Obama and Federal Reserve Chair Janet Yellen are expected to meet to discuss monetary regulation and economic issues.

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