Mortgage rates retreat, capping a grim spring selling season
The 30-year fixed-rate mortgage has averaged 4.40% so far this year, up from 3.99% in 2017
Rates for home loans pulled back in line with bond yields as trade war fears sent investors piling into safe assets.
The 30-year fixed-rate mortgage averaged 4.57% during the June 21 week, down from 4.62%, mortgage provider Freddie Mac said Thursday. The 15-year fixed-rate mortgage averaged 4.04%, down 3 basis points. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.83%, unchanged during the week.
Mortgage rates follow the path of the 10-year U.S. Treasury note,TMUBMUSD10Y, +0.77% although with a lag. Investors worried about an escalating trade war between the U.S. and China have snatched up safe-haven assets like bonds. When bond prices rise, yields decline.
Meanwhile, higher borrowing costs aren’t helping the housing market, where supply is stretched so tight Freddie Mac’s chief economist, Sam Khater, called it a “pressure cooker” in an interview with MarketWatch last fall.
The National Association of Realtors on Wednesday said sales of previously owned homes had stalled in May, marking a dud of a spring selling season across the nation.
At the Bala Cynwyd, Pennsylvania-based Allied Mortgage Group, demand for mortgage products remains strong, said Kyle Manseau, vice president of operations. Among Allied’s more affluent customer base, income growth is actually outpacing the combination of higher housing costs and rates, he said.
Manseau thinks the industry can manage through “a period” of higher rates.The bigger challenge, he said, will come from extremely lean inventory. As Khater put it, “Home shoppers can’t buy inventory that doesn’t exist.”
Still, Manseau said, “the speed with which rates have climbed means our loan officers have to do some education. From the time they first take the application to when they lock the mortgage, rates can move.”