By The Washington Post · Kathy Orton · BUSINESS, PERSONAL-FINANCE, US-GLOBAL-MARKETS
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average ticked up to 3.49% with an average 0.7 point. (Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.) It was 3.47 a week ago and 4.35% a year ago. The 30-year fixed-rate average has remained below 3.5% for three weeks in a row.
The 15-year fixed-rate average was slightly higher at 2.99% with an average 0.8 point. It was 2.97% a week ago and 3.78% a year ago. The five-year adjustable rate average slipped to 3.25% with an average 0.2 point. It was 3.28% a week ago and 3.84% a year ago.
Recent favorable economic data has done little to move rates. The consumer price index and producer price index were better than expectations. Although housing starts fell, building permits were near a 13-year high.
"January's decrease in single-family home construction came on the heels of a strong December that was helped by warmer weather," said Bill Banfield, executive vice president of capital markets at Quicken Loans. "With two strong months, it is clear warmer weather has helped the housing market earn some extra credit points. This could help generate positive momentum heading into the spring home-buying season."
Such good economic news normally would send mortgage rates higher, but investors remain concerned about the affect the coronavirus outbreak will have on the economy.
"The coronavirus and its impact have yet to be felt to its fullest extent - although Apple warned that it will have an impact on its numbers," said Jim Sahnger, mortgage planner with C2 Financial in Jupiter, Florida. "Until we see how that plays out, rates should remain stable. Absent the virus right now, rates would be climbing."
The yield on the 10-year Treasury drifted up to 1.56% Wednesday but has clung to a narrow range most of the month.
"It appears the equity markets and bond markets have differing opinions regarding the containment of the coronavirus and its potential for slowing the global economy," said Michael Becker, a branch manager with Sierra Pacific Mortgage in Lutherville, Maryland. "Equity markets have rallied with the S&P up 5% from its dip in January, while bond markets have seen Treasury yields hold near their multiyear lows."
Because mortgage rates tend to mimic the movement of long-term bonds, the 10-year yield is the most closely watched indicator of where rates are headed. Bankrate.com, which puts out a weekly mortgage rate trend index, found nearly two-thirds of the experts it surveyed predict rates will remain relatively unchanged in the coming week.
"Looking forward, I think it's clear that bond markets are going to take a more wait-and-see attitude when it comes to the economic dangers of the coronavirus outbreak," Becker said. "Because of that, I think mortgage rates will hold steady in the coming week."
Meanwhile, mortgage applications retreated as rates moved higher. According to the latest data from the Mortgage Bankers Association, the market composite index - a measure of total loan application volume - decreased 6.4% last week. The refinance index went down 8%, while the purchase index slid 3%.
The refinance share of mortgage activity accounted for 63.2% of applications.
"A gradual uptick in mortgage rates led to a pullback in mortgage applications last week, but the annual increases for both refinances and purchase activity remain robust at 165% and 10%, respectively," said Bob Broeksmit, MBA president and CEO. "With the spring home-buying season around the corner, housing supply in many parts of the country is struggling to keep up with demand. Fortunately, residential construction has picked up in recent months and should help increase the available options for prospective buyers."