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Mortgage Rates Dip Below 5 Percent for First Time in Four Months

By:
Ruth Singleton
Published Date:
Aug 4, 2022

mortgage

The rate for a 30-year fixed mortgage dropped to 4.99 percent, the first time in four months it went below 5 percent, according to the latest data released Thursday by Freddie Mac, the Washington Post reported. The rate was It was 5.3 percent a week ago and 2.77 percent a year ago. 

Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders across the country to arrive at with its weekly national averages. The information is based on home-purchase mortgages by high-quality borrowers with strong credit scores and large down payments.  

The 15-year fixed-rate average fell to 4.26 percent. It was 4.58 percent a week ago and 2.10 percent a year ago. The five-year adjustable rate average dropped to 4.25 percent. It was 4.29 percent a week ago and 2.4 percent a year ago. 

According to the Post, mortgage rates generally follow the yield on the 10-year Treasury, the most-watched indicator of investor confidence. That rate went down after the Federal Reserve raised its benchmark rate by three-quarters of a percentage point last week, falling to 2.6 percent on Monday. Since then, it has rebounded. It was 2.73 percent Wednesday. 

The Post quoted Paul Thomas, the vice president for capital markets at Zillow, who said, “Several economic indicators pointed to slowing economic activity—GDP declined for the second quarter in a row, new-home sales slowed and consumer confidence dropped due to inflation and recession concerns.” He added, “Investors reacted by driving longer-term rates—such as yields on 10-year Treasurys and mortgage-backed securities—lower, predicting the Fed will have to slow down rate hikes and potentially ease rates sooner than previously expected.” 

The Post explained that the recent volatility in mortgage rates  stems from oscillation between fears about a recession and concerns about inflation. When investors are worried about inflation, they stop buying bonds because the return on their investment is less when inflation is high. Less demand then causes bond prices to drop and yields to rise. Because mortgage rates often follow the same path as the 10-year Treasury yield, they also go up. But in a recession, bonds are seen as a safe investment. More demand for bonds causes prices to rise and yields to fall, which usually sends mortgage rates down. 

In response to the lower mortgage rate, the number of mortgage applications increased slightly last week, for the first time in a month. The market composite index—a measure of total loan application volume—increased by 1.2 percent from a week earlier, according to Mortgage Bankers Association data. And the refinance index rose by 2 percent from the previous week.  

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