As the yield on Treasury bonds declined, so did mortgage rates. But don’t expect rates to stay so low, experts advise.
The average rate on a 30-year fixed-rate mortgage fell to 2.90% in the week ending July 8, the lowest level since mid-February, according to Freddie Mac’s primary mortgage market survey released Thursday. The rate is eight basis points lower than a week earlier and is the lowest since the week ending February 18 (one hundred basis points – one percentage point).
The rate cut coincided with sharp movements in the Treasuries market. 10-year Treasury bond yields, with which mortgage rates are often correlated, decreases from mid-May and has accelerated since the beginning of July. The decline may be due to concerns about future economic growth, Barron’s previously reported…
Despite the recent decline in mortgage rates, economists expect rates to rise by the end of the year. Freddie Mac Chief Economist Sam Hather
said Thursday that he expects economic growth to lead to higher interest rates. Freddie Maca latest quarterly forecast, issued in April, calls for interest rates on 30-year fixed-rate mortgages at the end of the year averaging 3.4%.
Joel Kahn, deputy vice president of economic and industry forecasts for the Mortgage Bankers Association, said weekly mortgage rates could be volatile and that any trends in the latest numbers would be difficult to pinpoint. The trading group expects the average 30-year fixed mortgage rate to be 3.5% by the end of the year – a rate that is historically low, according to Kahn.
Keith Gambinger, vice president of mortgage site HSH.com, said mortgage rates may continue to fall in the near future, “but the fundamentals supporting higher rates remain in place.”
Fluctuations in the Treasury bond market are not the only force affecting mortgage rates, Freddie Mac’s Hather said. “While mortgage rates tend to be closely related to Treasury yields, other factors such as labor markets, which continue to improve according to last week’s employment report, may be influencing,” the chief economist said in a statement.
Hather noted that home buyers and refinancing borrowers are still taking advantage of the low rates. He expects 30-year interest rates to hover around 3% before gradually climbing higher.
Write to Shaina Mishkin by phone. firstname.lastname@example.org