Mortgage rates fell to their lowest level since October 2016, according to the latest Freddie Mac Primary Mortgage Market Survey. The report revealed that the 30-year fixed-rate mortgage (FRM) rate fell 0.5 points to 3.49% this week, down from 3.58% last week. During the same period last year, the 30-year FRM rate averaged 4.54%.
Weaker economic data has been one of the factors to have impacted mortgage rates recently according to experts.
"While economic growth is clearly slowing due to rising manufacturing and trade headwinds, economic fundamentals are still solid for U.S. consumers," said Sam Khater, Chief Economist at Freddie Mac. "The unemployment rate is low, housing affordability is improving, homebuyer demand is rising, and home price growth is stable."
According to George Ratiu, Senior Economist at realtor.com, investor reaction to a fall in manufacturing activity—the first drop since January 2016—has also been responsible for the decline. "Decreased new orders and employment point to a slump in the manufacturing sector, with potential implications for the economic outlook," said Ratiu. "Rates are over 100 basis points lower than a year ago, providing consumers with higher purchasing power. However, finding a home still remains elusive especially at the entry-level."
The 15-year fixed-rate mortgage rate also followed the trend set by the 30-year FRM rate. It declined by 0.6 points from last week's 3.06% to 3% this week. Similarly, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) was down by 0.4 points from last week's 3.31% to 3.3% this week. A year ago at this time, the 5-year ARM averaged 3.93% and the 15-year FRM rate averaged 3.99%.
Looking at the overall U.S housing market trends for fall, Ratiu said that financing for a home was likely to still remain affordable for the rest of the year.
"For U.S. housing, this past week included the Labor Day holiday and the last dash to the beach before the end of summer," Ratiu said. "As we head into the fall season, there will be less competition from families with children, providing good opportunities for singles, couples, and retirees, along with still-affordable financing."