NEW YORK–While the perception in the market is that rates are on the rise, mortgage rates have actually recently fallen to around their lowest levels in eight months.
The most recent national average on the 30-year fixed mortgage fell to 4.51%, matching the lowest level since last spring, according to data from Freddie Mac. That rate is still higher than its level of 3.95% from a year ago but is below the seven-year high of nearly 5% last Fall.
“I think there is latent demand on the sidelines given where rates are today,” Sam Khater, Freddie Mac’s chief economist, told the Wall Street Journal. “The problem is that volatility is the obstacle.”
The Journal noted rising rates choked off a boom in refinancings and damped the purchase market for much of 2018, slowing the pace of home-price growth.
Mortgage Apps Down
“The rate on a standard 30-year mortgage tends to closely follow the 10-year Treasury yield, which also hit a seven-year high of 3.23% last fall. On Friday, it finished at 2.66%,” the Journal reported. “Stock-market swings, high home prices and a traditionally slow time of year for home buying have largely kept a lid on housing-market activity in recent months. Mortgage applications slid 9.8% in the week ended Dec. 28 from two weeks earlier, according to a survey released Thursday by the Mortgage Bankers Association. The shutdown of the federal government also factored into the drop.”
Several Realtors told the Journal they have seen buyers “start to creep back into the market, as “sellers have lowered their expectations about prices and buyers are anxious that rates will rise further, both of which have contributed to a pickup in sales.”
Boon for Refinancings?
The Journal analysis also suggested refinancings also could pick up if mortgage rates keep falling. If the standard 30-year rate drops by another 0.2 percentage point, borrowers of about $300 billion worth of loans backed by Fannie Mae and Freddie Mac would find it beneficial to refinance because they would save at least an 0.5 percentage point on their rate, according to FTN Financial.
Those loans make up about 7.5% of outstanding loans backed by Fannie and Freddie.
“We’re right on the cusp of a significant refi event,” Walter Schmidt, manager of mortgage strategies at FTN Financial, told the Journal.