The average 30-year-fixed mortgage rate slipped back down to 2.99% for the week ending Oct. 7, according to Freddie Mac’s latest PMMS survey. The week before, rates had made it above the 3% mark for the first time since June.
Sam Khater, Freddie Mac’s chief economist, said in a statement that rates remain close to 3% as a result of continued unknowns in the financial markets, as the pandemic lingers on. Mortgage rates typically move in tandem with the ten-year U.S. Treasury yield, which was 1.53 for Oct. 6.
“Mortgage rates continue to hover at around three percent again this week due to rising economic and financial market uncertainties,” said Khater. “Unfortunately, with the expectation that both mortgage rates and home prices will continue to rise, competition remains high and housing affordability is declining.”
The previous week, the average 30-year-fixed mortgage rate rose 13 basis points to 3.01%.
A year ago at this time, the 30-year fixed-rate mortgage averaged 2.87%. The 15-year fixed-rate mortgage averaged 2.23%, down from last week when it averaged 2.28%.
HousingWire Editor-in-Chief Sarah Wheeler and Deluxe Senior Business Development Executive Mark McGuinn discuss the challenges lenders are facing to optimize lead generation, even as mortgage rates continue to drop.
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Mortgage rates have been kept low in part because of the Federal Reserve’s massive monthly purchases of $120 billion in U.S. Treasury bonds and mortgage-backed securities. The central bank has signaled that will eventually come to an end, however, and it is expected to begin to taper off its purchases when substantial further progress is made in the labor market.
Although rates remain at historic lows for now, market observers do expect rates to climb upward, eventually. Even a modest increase in rates could deter borrowers from seeking to refinance their mortgages.
This week, a sharp decline in refinances in turn led to an overall decrease in mortgage application volume, per a report from the Mortgage Bankers Association. The refinance index dropped 10% from the week prior, its lowest level in three months. Purchase activity, meanwhile, decreased a modest 2% from the previous week.
Overall, the mortgage application index was down 15% compared to the same time last year, driven by a larger year-over-year decrease in the refinance index and a more modest decrease in the purchase index.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, said that “higher rates are reducing borrowers’ incentive to refinance, as declines were seen across all loan types.”