Mortgage interest rates have declined every week since the start of the year, and Freddie Mac believes this could continue until Treasury yields return to normal levels.
Freddie Mac [1]‘s Primary Mortgage Market Survey [2] found that mortgage rates moved down for the sixth consecutive week amid “ongoing market volatility.”
For the week ending February 11, 2016, the average 30-year fixed rate mortgage (FRM) reached 3.65 percent with an average 0.5 point, down from last week when it averaged 3.72 percent. Last year, the 30-year rate was 3.69 percent. The 30-year rate is currently just slightly off the low of 3.59 percent recorded in 2015.
Sean Becketti, Chief Economist at Freddie Mac noted, "In a falling rate environment, mortgage rates often adjust more slowly than capital market rates, and the early-2016 flight-to-quality has run true to form. The 30-year mortgage rate has dropped 36 basis points since the start of the year, while the yield on the 10-year Treasury has dropped 59 basis points over the same period. If Treasury yields were to hold at current levels, mortgage rates might well sink a little further before stabilizing."
According to the survey, the 15-year FRM averaged 2.95 percent this week with an average 0.5 point. Last week, the 15-year rate was 3.01 percent down and year ago at this time, the 15-year FRM averaged 2.99 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.83 percent with an average 0.4 point this week, the report showed. Last week, it was 2.85 percent and a year ago it averaged 2.97 percent.
As mortgage rates continue to climb, new home purchases also rose. The Mortgage Bankers Association [3](MBA) Builder Application Survey [4] data for January 2016 shows mortgage applications for new home purchases increased by 14 percent month-over-month.
According to the survey, conventional loans composed 67.4 percent of loan applications, FHA loans composed 19.5 percent, RHS/USDA loans composed 0.7 percent, and VA loans composed 12.4 percent.
The data showed that the loan size declined from $333,182 in December 2015 to $325,806 in January 2016.
Single-family home sales are projected to run at a seasonally adjusted annual rate of 499,000 units in January 2016, up 4.0 percent from the December pace of 480,000 units, according to the MBA.