Mortgage rate averages saw their biggest weekly drop since mid-September and clocked their seventh consecutive week of declines.
In its latest seesaw, the 30-year, fixed-rate mortgage average fell to 6.63% on a weekly basis, according to data mortgage giant Freddie Mac, a buyer of loans from banks, released Thursday. It’s the lowest average since early December.
The mortgage market update comes alongside, and because of, volatility in the broader economy. On a daily basis, the 30-year, fixed rate had moved ever so slightly higher to 6.72%, according to Mortgage News Daily. Though it’s an increase, daily measures of the mortgage rate account for even the smallest of changes, so they typically show more fluctuation than the combined average of the full week.
Taking an even bigger-picture look, the 30-year, fixed-rate average is also lower than it was during the comparable week last year. Put another way, last year if a homebuyer purchased a $400,000 house with no down payment, they’d be paying about $78,870 in principal and interest over the term of their mortgage. For that same purchase today, a buyer would pay slightly less, $76,890, over the 30 years.
From the Homes.com blog: Four Strategies to Pay Off Your Mortgage
The 15-year, fixed-rate average, popular with homeowners looking to refinance to a lower rate, also eased, decreasing to 5.79% from 5.94%, according to Freddie Mac. Mortgage News Daily’s measure showed that rate was unchanged at 6.18% as of Thursday afternoon.
Mortgage rates respond to data and investors
Fluctuations in mortgage rates are primarily driven by economic data that affects investor behavior, including reports about the job market and inflation.
When the economy is performing the way investors expect, that usually bodes well for lower mortgage rates. But when things don’t go as planned, that can put upward pressure on borrowing costs.
Aside from some not-so-rate-friendly data that came out on Wednesday, there has not been much expectation-defying economic data in the past two weeks to push rates higher. Even so, there have been changes in investor behavior during that time.
Over the past two weeks, some investors have opted to park their investments in the government by buying 10-year treasury bonds, the rate the government pays to borrow money from investors. Bonds are usually a safer investment than, say, the stock market, so they can be a preferred choice during times of economic uncertainty.
And right now, there’s a lot to be wary of in the market. This week, the White House has gone back and forth in regard to implementing its first series of taxes on goods imported from Mexico and Canada. At the same time, massive layoffs in the federal government are ongoing, and geopolitical tensions are flaring. Taken together, those factors, and more, could be making investors nervous.
Homebuyers are encouraged by falling rates
Despite investor precautions, homebuyers have taken advantage of the decline in mortgage rates.
Applications for mortgages surged last week, climbing more than 20%, according to data the Mortgage Bankers Association, a trade group that tracks the mortgage market, released Wednesday. It was the largest weekly increase in activity since January.
Whether the burst in activity lasts is hard to tell and is dependent on incoming data about the economy and investor decisions.
Tomorrow, there will be new data about the job market in the U.S., and next week there’s an update about inflation. What that means for the mortgage market is hard to tell, according to Matthew Graham, chief operating officer of Mortgage News Daily.
“As always, there's no way to know ahead of time if the data will help or hurt,” he wrote in a blog post Wednesday.