While waiting to see what the Federal Reserve would do at its meeting this week, mortgage rates held steady.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average was unchanged at 3.75% 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 4.60% a year ago.
The 15-year fixed-rate average ticked up to 3.20% with an average 0.5 point. It was 3.18% a week ago and 4.08% a year ago. The five-year adjustable rate average slipped to 3.46% with an average 0.4 point. It was 3.47% a week ago and 3.93% a year ago.
The Federal Reserve lowered the federal funds rate this week for the first time since the 2008 recession, but the move came too late in the week to be factored into Freddie Mac’s survey. The federally chartered mortgage investor aggregates rates weekly from 125 lenders from across the country to come up with national average mortgage rates.
Although the Fed’s rate cut didn’t impact the rates this week, it could have an effect going forward. The central bank doesn’t set mortgage rates, but its actions can influence them.
“The Federal Reserve’s decision to lower rates is generally good news for homeowners because it indicates that interest rates will likely stay in the very low ranges they’re at right now or they could continue to go lower,” said Mat Ishbia, president and CEO of United Wholesale Mortgage. “The market had already priced in a drop in rates, and to see rates that were already low drop even further makes it likely that they will stabilize in this range for the foreseeable future. This is great news for people looking to buy or refinance a home because rates are at some of the lowest points we’ve seen in years.”
Because the central bank cut its benchmark rate, the prime lending rate went down. The prime lending rate is what the banks use to set rates on many consumer loans, such as credit cards or auto loans, and small business loans. It affects adjustable-rate mortgages but typically not 30-year and 15-year fixed rate mortgages.
“Many borrowers will benefit, especially those with adjustable rate mortgages and commercial real estate loans,” said Lawrence Yun, the National Association of Realtors chief economist. “The longer term 30-year fixed rate mortgages will see little change in the near future because they had already declined in anticipation of this latest move by the Fed.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found the experts it surveyed were divided on where rates are headed. Thirty-seven percent said rates will rise, another 37% said they will fall and 25% said they will remain relatively stable in the coming week.
Greg McBride, chief financial analyst at Bankrate.com, is one who predicts rates will go up.
“The Fed left the door open to additional rate cuts, but didn’t commit to it,” McBride said. “With the positive tone of recent economic data, skepticism about the Fed cutting more will grow and mortgage rates will rebound a bit.”
Meanwhile, mortgage applications continued to decline. According to the latest data from the Mortgage Bankers Association, the market composite index – a measure of total loan application volume – decreased 1.4% from a week earlier. The refinance index ticked up 0.1% from the previous week, while the purchase index fell 3%.
The refinance share of mortgage activity accounted for 50.5% of all applications.
“Mortgage applications declined for the third straight week, although activity was still up 84% and 6% for refinances and purchases, respectively, compared to a year ago,” said Bob Broeksmit, MBA president and CEO. “With rates hovering around 4% this summer, housing demand has remained strong. Not enough homes for sale – especially in the entry-level price range – continues to be the main obstacle preventing some prospective buyers from finding a home.”
