Mortgage rates drop to their lowest level in a few months

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Long-term bond yields are unexpectedly falling, pushing mortgage rates down to their February lows.

According to the latest data released Thursday by Freddie Mac, the 30-year average fixed rate fell to 2.9% this week. A week ago, it was 2.98%, and a year ago – 3.03%. The 30-year fixed rate has remained below 3% for six of the past seven weeks.

Freddie Mac, a federal mortgage investor, sums up the rates of roughly 80 lenders nationwide to get the weekly national average. It uses rates for quality borrowers with good credit ratings and large down payments. Due to the criteria, these rates are not available to every borrower.

The study is based on home purchase mortgages, which means refinancing rates may be higher. The price adjustment for refinancing transactions, which took effect in December, increases the cost. The adjustment that applies to all Fannie Mae and Freddie Mac refinances is 0.5% of the loan amount. That makes $ 1,500 for a $ 300,000 loan.

The 15-year average fixed rate has dropped to 2.2%. A week ago, it was 2.26%, and a year ago – 2.51%. The average five-year regulated rate fell to 2.52%. A week ago, it was 2.54%, and a year ago – 3.02%.

“Mortgage rates fell this week, hitting their lowest level since winter,” said Matthew Speakman, an economist at Zillow. “Despite an overall strong overall June jobs data, a booming stock market and broader signs that the economy continues to recover, investors continue to revise their very optimistic growth forecasts earlier this year. downward pressure on long-term Treasury yields and the mortgage rates they affect. “

Despite the June employment report showing an improvement in the labor market, the 10-year Treasury yield fell to its lowest level since February this week, closing at 1.30% on Thursday. Wall Street analysts are taken aback by this drop. Many predicted that as the economy improved, investors would ditch bonds, resulting in yields rising by about 2%. Instead, they fell.

The minutes of the June meeting of the Federal Reserve System were released this week. They pointed out that Fed officials have begun talking about cutting back on their bond buying program, which keeps mortgage rates low, but not many seem ready to start the process. While financial markets reacted with restraint to the news, mortgage rates are expected to rise when the Fed actually begins to phase out its purchases.

Bankrate.com, which publishes a weekly index of mortgage rate dynamics, found that more than half of the experts it surveyed expect rate cuts in the coming week.

Meanwhile, mortgage applications declined for the second straight week, dropping to their lowest level since early 2020.

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