The mortgage rate seesaw is still going strong.
After bouncing up and down in the last two weeks, the 30-year, fixed-rate mortgage settled at a weekly average of 6.75% as of Thursday, according to mortgage giant Freddie Mac, which buys loans from banks, bundles them into securities and sells them. It’s higher than last week, but barely lower than the same time a year ago, when the average was 6.77%.
Similarly, the 15-year, fixed-rate mortgage increased on a weekly basis, averaging 5.92%, higher than the previous week, but lower than a year ago at the same time.
It's the mortgage market versus economic uncertainty
This week’s data adds to the already hefty pile of evidence that mortgage markets are stuck — and highly sensitive to economic data.
Last week, for example, rates increased after the monthly jobs report showed a stronger-than-expected labor market. This week, it was a similar story.
Matthew Graham, chief operating officer at Mortgage News Daily, said the movement came in response to a discussion between President Donald Trump and lawmakers about the possibility of firing the chair of the Federal Reserve.
“Word got out. Markets reacted,” Graham said. That reaction, driven by investors, meant movement in the bond market that affected mortgage rates.
The sensitivity was apparent on a daily basis, too. Daily measures of mortgage rates are generally more volatile than averages because they’re a reflection of every change in markets.
As of Thursday morning, the daily 30-year, fixed-rate mortgage had fallen slightly to 6.83%, while the daily 15-year, fixed-rate mortgage had inched upward to 6.08%.
“Bottom line, rates held relatively steady today despite getting a taste of the sort of volatility that could follow any fully realized Fed Chair ouster,” Graham added in a Wednesday blog post.
The takeaway is that the mortgage market is still highly susceptible to policy decisions and the resulting investor reaction.
And borrowers versus stability in the mortgage market
Just as mortgage rates are hypersensitive to economic data and uncertainty, so too are borrowers hypersensitive to changes in the mortgage market.
The Mortgage Bankers Association’s weekly measure of mortgage loan application volume dropped 10% in the week ended July 11, erasing the previous week’s gains, and then some. The decrease corresponded to last week’s increase in mortgage rates, according to Joel Kan, the industry group’s deputy chief economist.
“Mortgage rates rose after two weeks of declines, which contributed to slower application activity,” Kan said in a statement. “Purchase applications remained sensitive to both the uncertain economic outlook and the volatility in rates and declined to the slowest pace since May. Refinance applications also dipped because of higher rates, with refinance applications falling.”
The back and forth in both mortgage rates and consumer behavior is expected to continue, MBA’s CEO and President Bob Broeksmit added in a separate statement.
“Higher rates and continued economic uncertainty muted overall demand,” he said. “We expect application activity to continue to see-saw within a narrow range, with movement primarily reflecting the direction of mortgage rates.”