Mortgage rates are hold steady after weeks of turbulence
The 30-year fixed rate has been on a wild ride the past several weeks.
Over the past several weeks, mortgage rates have whipped from sharp declines to sudden increases to abrupt dives. This week, they paused to catch their breath.
According to the latest data, released Thursday by Freddie Mac, the 30-year fixed-rate average was unchanged at 3.33 percent with an average 0.7 points. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 4.12% a year ago.
The 30-year fixed rate has been on a wild ride the past several weeks. It plummeted to a historic low of 3.29 percent on March 5, soared to 3.65 percent two weeks later, and then went back to its current level last week.
Freddie Mac, the federally chartered mortgage investor, aggregates rates from 125 lenders across the country to come up with national average mortgage rates. It uses rates for borrowers with flawless credit scores. The rates quoted are not available to every borrower.
The 15-year fixed-rate average fell to 2.77 percent with an average 0.6 points. It was 2.82 percent a week ago and percent a year ago. The five-year adjustable rate average held steady at 3.4 percent with an average 0.3 points. It was 3.8 percent a year ago.
“Rates have been relatively stable lately — at least by recent standards — suggesting that the historic intervention by the Federal Reserve has at least partially achieved its goal of easing market volatility and ensuring the trains keep running,” said Matthew Speakman, a Zillow economist.
The Federal Reserve released the minutes from its two emergency meetings in March on Wednesday. The minutes provided insight into the central bank’s concerns. According to the minutes, “all participants viewed the near-term U.S. economic outlook as having deteriorated sharply in recent weeks and as having become profoundly uncertain.” As a result, the Fed slashed the federal funds rate by a half percentage point in the first meeting and a full percentage point in the second one. It also restarted its massive bond-buying program, which expanded its balance sheet by about $1.6 trillion in March.
Although rate cuts by the Fed have little effect on mortgage rates, the bond-buying program does. Much like in 2008 as part of its quantitative-easing program, the Fed has been buying mortgage-backed securities — or MBSs as they are often known — which are bundles of mortgages sold on a secondary market. When a borrower takes out a loan such as a 30-year fixed-rate mortgage, a lender often bundles that loan with other loans into an MBS and then sells it to investors.
Interest rates for loans are usually based on MBS prices. When MBS prices go up, secondary market prices go down. (It’s not unlike US Treasurys. When prices go up, yields go down.) The Fed’s unlimited MBS buying has been pushing prices up and driving down rates.
“It seems the Fed has found its rhythm in its bond purchases, keeping the market relatively smooth,” said Elizabeth Rose, a certified mortgage planning specialist at AmCap Home Loans in Plano, Texas.
Bankrate.com, which puts out a weekly mortgage rate trend index, found the experts it surveyed are mixed on where rates are headed in the coming week. About 40 percent predict that they will drop; about 40 percent expect them to remain relatively unchanged; and the rest say they will go up.
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