As the spring homebuying season comes to a close and Americans cope with the uncertain after effects of the Greek crisis on the economy, the U.S. Treasuries lowered average fixed mortgage rates down to 4.04 percent, according to Freddie Mac's Primary Mortgage Market Survey (PMMS) results.
"Yields on Treasury securities declined this week in response to investor concerns about events in Greece and China,"said Sean Becketti, chief economist at Freddie Mac. "Mortgage rates fell as well, although not by as much as government bond yields."
With the Greece crisis still brewing and Treasury security yields falling, the 30-year fixed-rate mortgage (FRM) averaged 4.04 percent with an average 0.6 point for the week ending July 9, 2015. Last week, the rate averaged 4.08 percent and a year ago the 30-year FRM averaged 4.15 percent.
Freddie Mac also reported that the 15-year FRM averaged 3.20 percent this week with an average 0.5 point, down from last week when it averaged 3.24 percent. A year ago at this time, the 15-year FRM averaged 3.24 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.93 percent this week with an average 0.4 point, down from last week when it averaged 2.99 percent. Meanwhile, the 1-year Treasury-indexed ARM averaged 2.50 percent this week with an average 0.3 point, down from last week when it averaged 2.52 percent.
"Overseas volatility is likely to persist for some time, providing some restraint on potential U.S. rate increases," Becketti said. "In addition, the minutes of the June meeting of the Federal Open Market Committee suggest the Federal Reserve will proceed cautiously—monitoring events both overseas and in the U.S. to ascertain the appropriate moment to begin raising short-term interest rates. As a result, mortgage rates may remain in the neighborhood of 4 percent for a while."
The recent June Federal Open Market Committee meeting revealed that although economic activity is expanding moderately and job gains are increasing, the committee decided that the federal funds rate will remain the same at a target range of 0 to ¼ percent.
“The Committee continues to judge that the first increase in the federal funds rate will be appropriate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term,” said Janet Yellen, FOMC chair. “At our meeting that ended today, the Committee concluded that these conditions have not yet been achieved. It remains the case that the Committee will determine the timing of the initial increase in the federal funds rate on a meeting-by-meeting basis, depending on its assessment of incoming economic information and its implications for the economic outlook.”
The Federal Reserve Bank of New York also touched on the topic of interest rates this week. They recently released their Liberty Street Economics report titled "How Sensitive Is Housing Demand to Down Payment Requirements and Mortgage Rates?" that identified how small of a role mortgage rates play in terms of housing demand.
"Our findings suggest that the strength of housing demand is strongly affected by fundamentals (household wealth and income) and also the quantity of available financing (especially for first-time home buyers)," the NY Fed Reserve said. "The price of available financing (that is, the mortgage rate) may play a less important role than commonly thought, although we emphasize that our stylized setting omits certain factors, such as payment-to-income constraints, that may in reality affect households’ ability to qualify for loans."