As recently as this past week, fixed mortgage rates for most home loans bottomed out. According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage dropped to 4.12% from 4.14% in the previous week. No more than a year ago, the rate on a similar mortgage was approximately 4.40%. Conversely, it would appear as if 15-year loans are destined to succumb to the same fate as their 30-year counterparts. The average rate on a 15-year fixed-rate mortgage dropped from 3.27% to land at 3.24%. At their current rate, mortgages have once again reached their 2014 low.
“Mortgage rates were down slightly amid a week of light economic reports,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement.
Conversely, Averages for the two most popular hybrid adjustable-rate mortgages were mixed. The five-year ARM inched down to 2.97% from where it was a week ago. A year ago, it averaged 3.23%. The one-year ARM average ticked up to 2.36% from 2.35% last week. It was at 2.67% at this time last year.
Despite recent predictions of rates exceeding 5% by the end of the year, rate increases have tempered. Due in part to the Federal Reserve’s announcement regarding the tapering of its bond-buying stimulus plan, the increasing rates we saw at the end of 2013 appear to be behind us bow. Essentially, the program has helped offset dramatic gains in real estate prices and kept affordability elevated while the market has stabilized.
Experts familiar with the market have acknowledged that they expect rates to remain low for the foreseeable future. That is a far cry from what was being said of interest rates heading into this year.
“Things seem to have settled down just a bit in the roller-coaster world of the bond market and mortgage interest rates,” said Derek Egeberg, branch manager at Academy Mortgage in Yuma, AZ. “Some of the global tensions seem to be easing a bit, and economic data being released domestically has been sort of a mixed bag of good news and bad news.”
“Remember: the bond market, where mortgage interest rates are priced, is the beneficiary of uncertainty or negative information or both—the sorts of things we don’t wish for! That being said, mortgage interest rates remain very attractive.”
Of particular interest, however, are waning mortgage numbers in lieu of record low interest rates. Mortgage applications have struggled to regain prominence despite lower mortgage rates and a slower home price growth. As recently as last week, the Mortgage Bankers Association revealed that total mortgage application volume dropped 2.7 % from the previous week (seasonally adjusted). Moreover, even applications to refinance were down about 4%. This is particularly surprising, as they had demonstrated a propensity for increasing just one week earlier. In all, refinancing applications are down 28 % from this time last year.
Again, mortgage applications have declined in spite of attractive rates. In fact, they have fallen so far that they are once again at their lowest level since February. With the drop, they are only down about 10% year-to-year.
Mortgage-dependent buyers have not come back to the housing market as quickly as some expected. According to the National Association of Realtors, (NAR), home sales in the second quarter were better than the bitter winter months, but still off 4.5 percent from a year ago.
“The general lack of movement can’t be overemphasized. This is an uncommon occurrence following a move to recent lows fueled by geopolitical risk,” wrote Matthew Graham of Mortgage News Daily. “When unexpected headlines cause rapid movements in financial markets, rates don’t normally just freeze at the lows for days on end. Not only have things been stagnant in the short term, but the past few months have been exceptionally flat as well.”
Despite mortgage applications experiencing a 10% decline in the past year, the dollar amount they have been approved for is down just 1%. This would lead us to believer that those receiving mortgages are either buying more expensive homes or getting larger loans. The average rate on a jumbo mortgage is actually lower than that of a conventional loan; historically it is the other way around.