Coronavirus could push mortgage rates to all-time lows

By Kathy Orton

January 24 , 2019 at 10:25 AM

Fixed mortgage rates have settled in, awaiting a resolution to the federal government shutdown.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average hasn’t budged for three weeks. It has remained at 4.45 percent with an average 0.4 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) A year ago, it was 4.15 percent.

The 15-year fixed-rate average also didn’t move, holding steady at 3.88 percent with an average 0.4 point. It was 3.62 percent a year ago. The five-year adjustable rate average ticked up to 3.90 percent with an average 0.3 point. It was 3.87 percent a week ago and 3.52 percent a year ago.

 

With the stock market relatively calm and trade tensions easing, mortgage rates have no place to go at the moment. They seem to be in a holding pattern until lenders get a better gauge on the economy.

“Mortgage rates were flat again this week, despite fluctuations caused by geo-political uncertainty and unexpectedly strong manufacturing data,” said Aaron Terrazas, senior economist at Zillow. “As the U.S. government shutdown continues, markets remain reliant on private-sector and international data in order to gauge the strength of the U.S. economy. … In the absence of most economic data releases, it will remain particularly difficult for monetary policymakers to set expectations until the government re-opens. As a result, markets are likely expecting this volatile yet net-sideways trend to continue until Washington heads back to work.”

The 10-year Treasury has started to claw back some of the ground it lost over the past month, reaching 2.79 percent on Friday before cooling to 2.74 yield on the percent Tuesday. It bounced back to 2.76 percent Wednesday. Because mortgage rates tend to follow the same path as long-term bond yields, they are also expected to begin moving higher.

Bankrate, which puts out a weekly mortgage rate trend index, found the experts it surveyed evenly split on where rates are headed. About half say rates will go up and about half say they will remain relatively stable in the coming week. Elizabeth Rose, .com a certified mortgage planner at Nations Lending, is among those predicting rates will rise.

“Mortgage bonds have fallen below an important support level,” Rose said. “The positive corporate earnings are giving stocks a boost higher and, should that continue, mortgage rates will creep higher.”

 

Logan Mohtashami, a senior loan officer at AMC Lending Group, expects rates to be flat.

“Even with the market sell-off on Tuesday, yields didn’t fall much,” he said. “I believe until we see actually weaker U.S. PMI data and global data, the lows in the 10-year yield at 2.55 percent are set. … The government shutdown and China deal are the wild cards in play, for now, keep an eye out on any real news on both.”

Meanwhile, after two weeks of impressive gains, mortgage applications pulled back this week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — decreased 2.7 percent from a week earlier. The refinance index fell 5 percent from the previous week, while the purchase index slipped 2 percent.

The refinance share of mortgage activity accounted for 44.5 percent of all applications.

“After two straight weeks of increased production to start 2019, mortgage lenders reported a slight dip in applications over the last week,” said Bob Broeksmit, MBA president and CEO. “With the spring buying season around the corner, it does appear that rising inventory levels and stabilizing affordability conditions are spurring sustained buyer interest, as purchase applications were still up 13 percent from a year ago and remained near a nine-year high.”