Smart Borrower Blog

Nervous Investors Push Mortgage Rates Down


Nov 1st, 2018 @ 8:12 AM by Amber Nelson


Average rates on long-term mortgage loans fell in the latest week, dampened by investors’ flight to the safety of bonds after the recent stock market declines.

According to mortgage guarantor Freddie Mac, the average rate on a 30-year fixed rate mortgage (FRM) dropped to 4.83 percent with an average 0.5 point for the week of November 1, 2018, down from 4.86% the previous week. One year earlier, the rate was just 3.94%.

The 15-year FRM carried a rate of 4.23% with an average 0.5 point, down from 4.29% the week before, but up from last year’s 3.27%.

ARM loans saw big decreases as well. The 5-year Treasury-indexed hybrid adjustable rate mortgage fell to 4.04% with an average 0.3 point, down from 4.14% the week earlier.

Freddie Mac’s chief economist Sam Khater said mortgage rates are not the biggest factor influencing today’s market. “While higher mortgage rates have led to a decline in home sales this year, the weakness has been concentrated in expensive segments versus entry-level and first-time buyer which remains firm throughout most of the rest of the country. Despite higher mortgage rates, the monthly mortgage payment remains affordable. For many buyers the chronic lack of entry-level supply is a larger hurdle than higher mortgage rates because choices are limited and the inventory shortage has caused home prices to rise well above fundamentals.”

The decline in rates seems to be in line though with a general slowing of the housing market. In August, home prices grew at their slowest pace in almost two years, according to a recent S&P CoreLogic Case-Shiller report.

The housing market growth of the last several years seems unsustainable to many. “For 11 months straight, up until July, the national index has gone up by an annual rate of more than 6%,” said David Blitzer, manager of the Case-Shiller report said. “Inflation’s 2%, plus or minus, wage increases are between 2 and 3%, so home prices are going up almost twice as fast as anything else in sight. That shouldn’t happen forever. Something’s got to give in a market, whether it’s buying houses or groceries. So I’ve been waiting to see what gives.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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