Falling weekly mortgage rates is leading to not only an increase in home buying but is also seeing an even bigger demand when it comes to loan refinancing. That’s because when mortgage rates drop it’s viewed as a buyers market because it typically translates into lower interest rates being offered by lenders. Borrowers are then able to purchase property or refinance their mortgages at an even lower rate, which means more money in their pockets.
The 30-year fixed-rate mortgage (FRM) averaged 3.57 percent, down 8 basis points for the week ending October 10, 2019, down from last week when it averaged 3.65 percent according to a recent Freddie Mac report. Compared to last year, it’s a substantial difference with the 30-year FRM averaged 4.9 percent.
15-year fixed-rate mortgage averaged 3.05 percent for the week ending October 10, 2019, with an average 0.5 point, down from the previous week at an average of 3.14 percent.
“Despite the economic slowdown due to weakening manufacturing and corporate investment, the consumer side of the economy remains on solid ground. The fifty-year low in the unemployment rate combined with low mortgage rates has led to increased homebuyer demand this year,” says Sam Khater, Freddie Mac’s Chief Economist. Much of this strength is coming from entry-level buyers – the first-time homebuyer share of the loans Freddie Mac purchased in 2019 is forty-six percent, a two-decade high.”
Meanwhile refinance activity is up a whopping 163% higher compared to a year ago, according to the Mortgage Bankers Association’s most recent report.
“U.S. Treasury rates moved sharply lower last week, as data showing weakness in the services sector was a sign that slowing economic growth is not confined to the manufacturing sector. This in turn caused a flight to safety by investors, resulting in mortgage rates dropping across the board, with the 30-year fixed rate decreasing nine basis points to 3.9 percent – the lowest level in a month,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting. “As seen a few times this year, the large drop in rates caused another surge in refinance applications. The refinance index increased 10 percent to its highest level since late August, with both conventional and government refinances experiencing an upswing.”
But when it comes to purchase loan volume, that’s a completely different story. MBA reported at a modest increase of 10% in comparison to the same week one year ago.
Mortgage rates are tied to yields on 10-year Treasury notes which declined 0.4 percentage point this June yet the average mortgage rate dropped a stellar 0.16 percentage point. Financial gurus and mortgage industry experts always keep a close eye between the 10-year Treasury yield and the 30-year mortgage rate to keep a pulse on America’s mortgage market health.
Dow Jones Market Data reports the gap between mortgage rates and 10 year Treasury notes is higher than it has been in over seven years.