Mortgage rates showed little change heading into the Federal Reserve meeting. But now that the central bank has revised its stance, they could be headed lower.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average edged up to 3.84 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 3.82 percent a week ago and 4.57 percent a year ago.
The 15-year fixed-rate average slipped to 3.25 percent with an average 0.4 point. It was 3.26 percent a week ago and 4.04 percent a year ago. The five-year adjustable rate average dipped to 3.48 percent with an average 0.4 point. It was 3.51 percent a week ago and 3.83 percent a year ago.
The Federal Reserve concluded its meeting Wednesday leaving its benchmark rate untouched. However, it expressed concerned about inflation, slowing global growth and a trade war. Over the past several months, the central bank has swung from steadily increasing its benchmark rate to a more patient stance to considering a rate cut.
The drop in long-term bond yields came too late in the week to factor into Freddie Mac’s survey. The federally chartered mortgage investor aggregates current rates weekly from 125 lenders from across the country to come up with a national average mortgage rate.
“Mortgage rates were largely flat for the week but have started to fall after blockbuster announcements from central banks on each side of the Atlantic,” said Matthew Speakman, a Zillow economist. “Markets hotly anticipated this week’s meeting of the [Federal Reserve], but it was the European Central Bank that first jolted rates from their generally sideways movement this week. On Tuesday, ECB President Mario Draghi suggested that more stimulus was likely in the coming months, in comments that sent bond yields sharply downward. Fed Chairman Jerome Powell followed suit on Wednesday, holding the federal funds rate steady but suggesting that the Fed would be open to cutting rates in the coming months should the current economic outlook fail to improve. Bond yields fell sharply again, hitting their lowest levels since the 2016 election day. Mortgage rates are likely to follow in tow for the short term, although it’s unclear how long these low rates will last.”
“At the conclusion of their June meeting, the Federal Reserve did not disappoint markets that were expecting a dovish statement,” said Michael Becker, branch manager at Sierra Pacific Mortgage in White Marsh, Md. “The Fed hinted at a July cut, dropped their ‘patient’ on rates statement and added that ‘uncertainties’ around its outlook have increased. This was a key statement and markets took it as a sign the Fed will cut rates in either July or September with one more cut in 2019 and a third in 2020. Bonds are rallying on this news and mortgage rates are improving.”
Meanwhile, mortgage applications pulled back. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — decreased 3.4 percent from a week earlier. The refinance index fell 4 percent from the previous week, while the purchase index also dropped 4 percent.
The refinance share of mortgage activity accounted for 50.2 percent of all applications.
“Mortgage rates increased last week but are still considerably lower than last summer, which is why lenders continue to report that they are busier,” said Bob Broeksmit, MBA president and CEO. “Despite a 3.4 percent decline in applications, refinances were up 79.5 percent from a year ago and purchase activity was up 4 percent.”