One silver lining from trade tensions with China and fears about a slowing global economy – the same factors whipsawing the stock market this week – is that mortgage rates are heading lower.
That is helping homeowners and buyers alike.
People who bought in the last two to three years may pocket major savings by refinancing their mortgage, while those hunting for a new home may get a bit more spending power, thanks to lower rates.
The average rate on the 30-year fixed mortgage – the most popular for home purchases – fell to 4.01% last week from 4.08% the previous week, the Mortgage Bankers Association reported. That was the lowest level since November 2016.
The average rate for 15-year fixed-rate mortgages – a common refinance option – slipped from 3.48% to 3.37%, the lowest since September 2016, the MBA said.
Even lower rates are expected this week.
“The Federal Reserve cut rates as expected last week, but the bigger influence on the financial markets was the beginning of a trade war with China,” said Mike Fratantoni, MBA’s chief economist said in a statement. “The result was a sharp drop in mortgage rates, which will likely draw many refinance borrowers into the market in the coming weeks.”
As trade tensions escalated, jittery investors poured money into longer-term U.S. Treasurys, considered safe investments, lowering their yield. Fixed mortgage rates typically follow the yield on the 10-year Treasury.
“We fully expect that refinance volume will jump even higher this week given the further drop in rates,” Fratantoni said.