For the third consecutive weeks, data released by Freddie Mac showed a substantial drop in mortgage rates. Since Ben Bernanke, former chairman with the Federal Reserve Bank, gave a Congressional testimony in May of 2013 rates have never been as favorable as they are now.
During that testimony, Bernanke talked about tapering the bond-buying program under the Federal government, which in turn caused rates to increase drastically. However, with weak US Treasury bond yields and a struggling global economy, rates have declined.
With the recent decline, the average 30-year fixed mortgage rate dropped to 3.66% to include an average 0.6 point. In addition, the 15-year fixed mortgage rate hit 3% with an average 0.5 point. Just last week, numbers were reported as 3.73% and 3.05% respectively.
Also on the decline were hybrid adjustable rate mortgages with the five-year adjustable-rate mortgage hitting 2.9 % with an average 0.4 point, compared to 2.98% last week. For the one-year adjustable-rate mortgage, the current rate is to 2.37% with an average 0.4 point, down from last week’s 2.39%.
As stated by Frank E. Nothaft, vice president and chief economist with Freddie Mac, this is the third week in a row that mortgage rates have declined, along with a drop in the price of oil and long-term Treasury yields, even though the latest employment report was strong.
Also reported in the latest data released was a pike in mortgage applications that followed the rate drop last week. In looking at the market composite index, which is used to measure the total volume of loan applications, it climbed 49.1%. The refinance index also soared 66% and the purchase index 24%, both reaching the highest levels since 2013.
For all applications, 71% was specifically for the refinance portion of activity. As reported by Mike Fratantoni, chief economist with MBA, the volume of refinance applications was significant, more than doubling without being adjusted. However, after making adjustments to include the New Year holiday, volume was up 66%.
There was also an increase for conventional refinance applications, up more than four times compared to the prior week. Not only was there substantial rate decreases, the job market showed further improvement. For potential homebuyers, this is great news.