Low mortgage rates spur homebuying

After more than a month of declines, mortgage rates paused their descent ahead of next week's Federal Reserve meeting.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average was unchanged at 3.82% with an average 0.6 point. Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate. It was 4.62% a year ago.

The 15-year fixed-rate average dipped to 3.26% with an average 0.5 point. It was 3.28% a week ago and 4.07% a year ago. The five-year adjustable-rate average slipped to 3.51% with an average 0.4 point. It was 3.52% a week ago and 3.83% a year ago.

"Mortgage rates were flat this week, remaining near their lowest levels in more than a year as some uncertainty surrounding trade tensions appeared to ease," said Matthew Speakman, a Zillow economist. "But the near-zero net change does not do justice to the bumpy ride rates took over the past seven days. Friday's underwhelming jobs report sent rates skidding lower, continuing their weekslong downward trajectory toward long-term lows. But Monday's news that tariffs on goods imported from Mexico would not go through as planned nudged bond yields back upward and mortgage rates followed suit, a trend that continued through Tuesday."

Bankrate.com, which puts out a weekly mortgage rate trend index, found that experts it surveyed were divided on where rates were headed.

Shashank Shekhar, CEO of Arcus Lending in San Jose, predicts rates will continue to fall.

"With lower inflation numbers and even talk about Fed cutting rates later this year, mortgage bonds will continue to get a boost," he said. "Expect the rates to trend lower this week, albeit not significantly."

But Elizabeth Rose, a certified mortgage planning specialist at AmCap Home Loans in Plano, Texas, expects rates to hold steady.

"Trade talks continue to influence the markets," Rose said. "In addition, inflation continues to remain tame, which is good for mortgage rates. However, this recent rally has slowed and could come to an end soon. Mortgage bonds are in a range that could keep mortgage rates relatively unchanged for the coming week."

LendingTree's recent mortgage comparison shopping report found that nearly 54% of purchase borrowers received a mortgage rate less than 4.25%.

Meanwhile, low rates fueled a spike in mortgage applications. According to the latest data from the Mortgage Bankers Association, the market composite index - a measure of total loan application volume - increased 26.8% from a week earlier. The refinance index shot up 47% from the previous week to its highest level since 2016. The purchase index jumped 10%.

The refinance share of mortgage activity accounted for 49.8% of all applications.

"Mortgage applications surged last week, with refinance and purchase activity both showing impressive weekly and year-over-year gains," said Bob Broeksmit, MBA president and CEO. "Rates are now considerably lower than they were a year ago and are increasing the purchasing power for this summer's prospective homebuyers. This is good news, considering that low supply levels - especially for first-time buyers - are still putting upward pressure on home prices and overall affordability." 

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