Refinances Jump as Mortgage Rates Plunge
Apr 26th, 2017 @ 8:01 PM by Amber Nelson
Long-term mortgage interest rates took a dive last week as investors worried about foreign finances and politics, clearing the path for an increase in U.S. refinance applications.
According to data from mortgage giant Freddie Mac, the average rate on a 30-year fixed rate mortgage loan sank to 3.97 percent with an average of 0.5 points for the week ended April 20, 2017, the lowest point since November 2016 and a dramatic drop from 4.08 percent the week before. One year ago, the average rate was 3.59 percent.
Rates on 15-year fixed rate mortgages also fell last week, with the average declining to 3.23 percent with an average 0.5 points, down from 3.34 percent the previous week.
“The 30-year mortgage rate fell 11 basis points this week to 3.97 percent, dropping below the psychologically-important 4 percent level for the first time since November,” said Freddie Mac chief economist Sean Becketti. “Weak economic data and growing international tensions are driving investors out of riskier sectors and into Treasury securities. This shift in investment sentiment has propelled rates lower.”
The significant plunge in rates led to a 2.7 percent overall increase in mortgage applications, according to the Mortgage Bankers Association with the MBA’s refinance index jumping 7 percent. Refinance requests made up 44.0 percent of all applications, up from 42.4 percent the week before. The average loan size for refinance applications also climbed to its highest level in 8 months to $266,900.
Mortgage interest rates have started rising again though as investors’ fears about the recent French election have calmed and they now turn their attention to U.S. tax reform policies being discussed by the Trump administration. Instead of the security of bonds, anticipation of the inflation that tax reform could bring has investors turning to riskier and more profitable stocks. If significant tax reforms are instituted, mortgage rates will leave their current lows for the foreseeable future.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.