Mortgage rates were mostly unchanged from last week due to easing of trade tensions with Mexico which helped stabilize markets. These historically low rates should provide continued opportunities for current homeowners to refinance their mortgages – which combined with new homebuyer activity – will help sustain the momentum in the housing market in 2019.
While the drop in mortgage rates is a good opportunity for consumers to save on their mortgage payment, our research indicates that there can be a wide dispersion among mortgage rate offers. By shopping around and getting a single additional mortgage rate quote, a borrower can save an average of $1,500. These low rates are also good news for current homeowners. With rates dipping below four percent, there are over $2 trillion of outstanding conforming conventional mortgages eligible to be refinanced – meaning the majority of what was originated in 2018 is now eligible.
Mortgage rates fell for the fourth consecutive week and continued the medium-term trend of lower rates since late 2018. The drop in mortgage rates is causing purchase demand to rise and the mix of demand is skewing to the higher end as more affluent consumers are typically more responsive to declines in rates.
Investors wary of the current economic situation due to ongoing trade disputes resorted to the bond market, causing the 10-year treasury yield to decrease. A combination of low mortgage rates, a strong job market and modest wage growth should spur homebuyer interest and also serve as an incentive for homeowners looking to refinance.
Despite the recent rise in mortgage rates, both existing and new home sales continue to show strength – indicating the lagged effect of lower rates on housing demand. This, along with improved affordability, should push housing activity higher in the coming months.
The Federal Reserve’s concern about the prospects for slowing economic growth caused investor jitters to drive down mortgage rates by the largest amount in over ten years. Despite negative outlooks by some, the economy continues to churn out jobs, which is great for housing demand. We have recently seen home sales start to recover and with this week’s rate drop we expect a continued rise in purchase demand.
Weaker manufacturing data and a more dovish tone from the Federal Reserve left mortgage rates unchanged relative to last week. However, interest rate-sensitive sectors of the economy – such as consumer mortgage demand and homebuilder construction sentiment – are on the mend, which indicates that lower interest rates are beginning to have a positive impact on some segments of the economy.
Mortgage rates declined over the past week and have now retreated in four of the past five weeks.
The decrease in borrowing costs are a nice slice of relief for prospective buyers looking to get into the market this summer. Some are undoubtedly feeling the affordability hit from swift price appreciation and mortgage rates that are still 67 basis points higher than this week a year ago.
As highlighted in our June Forecast, the economy and housing market overall are on solid footing this summer, which should support continued strength in housing demand. Home price growth is still high, but is expected to moderate, and while sales activity has slowed, it’s primarily because of stubbornly low supply.
Mortgage rates dipped for the second consecutive week.
Homebuyers have taken advantage of the recent moderation in rates, which led to a 4 percent increase in purchase applications last week.
Although demand has remained steadfast against the backdrop of this year’s higher borrowing costs, it’s important to note that the growth rate of purchase loan balances has moderated so far this year – and particularly since March. This slowdown indicates that buyers are having difficulty stretching to keep up with the pace of home-price growth.
While the very healthy job market continues to fuel interest in buying a home, the supply shortages in most markets are pushing prices higher and currently keeping sales at a standstill. Listings for new and existing homes need to increase in the months ahead to moderate price growth and reignite sales activity.
Mortgage rates moved up over the past week to 4.66 percent, their highest level since May 5, 2011 (4.71 percent).
Mortgage rates so far in 2018 have had the most sustained increase to start the year in over 40 years. Through May, rates have risen in 15 out of the first 21 weeks (71 percent), which is the highest share since Freddie Mac began tracking this data for a full year in 1972.
At a time when housing inventory remains extremely low, it’s worth watching whether these higher borrowing costs lead some would-be sellers to stay put in their current home. Inventory shortages would likely worsen if more homeowners decide not to sell out of reluctance of having a new mortgage with a higher rate.