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05/09/2018

Mortgage rates tick down, giving buyers a break

Rates for home loans pulled back after hitting a four-and-a-half-year high, in a springtime reprieve for home buyers.

The 30-year fixed-rate mortgage averaged 4.55% during the May 3 week, according to Freddie Mac’s survey, released Thursday. That was down from 4.58% in the prior week. The 15-year fixed-rate mortgage averaged 4.03% during the week, up one basis point during the week. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.69%, down from 3.74%.

Those rates don’t include fees associated with obtaining mortgage loans.

Mortgage rates follow the path of the benchmark 10-year U.S. Treasury noteTMUBMUSD10Y, +0.45%  , which has been under pressure this year as investors expect a faster pace of inflation, which would erode the value of existing bonds, and more borrowing by the U.S. government to patch big deficits.

As bond prices fall, yields rise.

The recent sell-off eased a bit this week even as the Federal Reserve acknowledged rising inflation, and reiterated its forecast for two to three more short-term interest rate increases in 2018.

 

ReadFed signals it won’t overreact to this summer’s expected higher inflation rate

Meanwhile, many areas of the housing market remain heated. Lopsided supply-demand dynamics are pushing prices higher and often favoring buyers who are better-prepared, such as those who can offer cash. Still, Freddie’s data show that 46% of the home loans they guaranteed as of April were taken out by first-time buyers, up from 43% last year.

ReadHome prices won’t slow down, stumping the experts and shutting out buyers

A decline of three basis points in the benchmark home loan product won’t help anyone who wants to buy, but if mortgage rates stabilize around this point, it will help keep buying a home relatively affordable.

As of January, the 30-year fixed-rate mortgage accounted for 92.2% of the market, according to data compiled by the Urban Institute. It has averaged 4.34% so far this year, up from 3.99% in 2017.

 

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Source: Marketwatch

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