Just a handful of months ago, mortgage rates were soaring. Now they are sinking.
According to data released Thursday by Freddie Mac, the 30-year fixed-rate average plunged to 4.06 percent, with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) The 30-year fixed, which was 4.28 percent a week ago, had its biggest one-week drop in a decade. It was 4.4 percent a year ago and is at its lowest level in 14 months.
The 15-year fixed-rate average sank to 3.57 percent, with an average 0.4 point. It was 3.71 percent a week ago and 3.9 percent a year ago. The five-year adjustable-rate average dropped to 3.75 percent, with an average 0.3 point. It was 3.84 percent a week ago and 3.66 percent a year ago.
Rates have fallen substantially in the past four months. After hitting a seven-year high of 4.94 percent in November, the 30-year fixed-rate average has gone down nearly a percentage point, falling 88 basis points. (A basis point is 0.01 percentage point.)
Global and domestic economic concerns are driving rates lower. The Federal Reserve’s announcement last week that it was taking a cautious approach to increasing its benchmark rate and unwinding its balance sheet rattled investors, which were already concerned about Brexit, the U.S.-China trade war, and slowdowns in the German and Japanese economies.
“Mortgage rates fell decisively this week as the fallout from last week’s policy announcement by the Federal Reserve and weak data from Europe inflamed uncertainty surrounding the strength of the global economy,” said Matthew Speakman, a Zillow economic analyst. “The [Fed’s] cautious decisions surprised markets and worsened many analysts’ concerns about the outlook for the global economy, boosting demand for Treasurys and pushing mortgage rates downward.”
With investors stashing money in safe assets such as long-term bonds, the yield on the 10-year Treasury tumbled to 2.39 percent — its lowest level since December 2017. It has dropped 37 basis points since the beginning of the month.
Because mortgage rates are closely tied to the movement of long-term bonds, they also declined.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that nearly two-thirds of the experts it surveyed say rates will remain relatively stable in the coming week.
“Since rates have dropped so much in the last two weeks, I expect them to level off here for a bit,” said Michael Becker, branch manager at Sierra Pacific Mortgage.
But Greg McBride, chief financial analyst with Bankrate.com, predicts rates could go down even more.
“With lots of economic data on tap and more to come with Brexit, the setting is ripe for more nervousness and volatility among investors, which would be good news for mortgage rates,” McBride said.
Meanwhile, fueled by falling rates, mortgage applications soared this week, according to the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — increased 8.9 percent from a week earlier. The refinance index jumped 12 percent from the previous week, while the purchase index rose 6 percent.
The refinance share of mortgage activity accounted for 40.4 percent of all applications.
“The ongoing decline in mortgage rates continues to deliver a solid boost to the mortgage market, with purchase applications last week increasing 6 percent and refinance applications surging over 12 percent,” said Bob Broeksmit, MBA president and chief executive. “Purchase activity has now risen year over year for six straight weeks, and momentum is likely to continue with the spring buying season underway.”