Mortgage rates shift lower on muted outlook

Mortgage rates hardly changed this week, decreasing nominally as better housing news came in and expectations for inflation and global economic growth remain tempered.

30 year fixed rate mortgage – 3 month trend
  • The benchmark 30-year fixed-rate mortgage fell to 4.1 percent from 4.13 percent last week, according to the national survey of large lenders. One year ago, that rate was 4.39 percent. Four weeks ago, it was 4.05 percent. The mortgages in this week's survey had an average total of 0.27 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4.37 percent. This week's rate is 0.27 percentage points lower than the 52-week average.
  • The benchmark 15-year fixed-rate mortgage fell to 3.3 percent from 3.32 percent.
  • The benchmark 5/1 adjustable-rate mortgage fell to 3.21 percent from 3.22 percent.
  • The benchmark 30-year fixed-rate jumbo fell to 4.13 percent from 4.15 percent.

Weekly national mortgage survey

Results of's Nov. 19, 2014, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:
Change from last week:-0.03-0.02-0.01
Monthly payment:$797.28$1,163.42$714.47
Change from last week:-$2.87-$1.61-$0.91

"Interest rates haven't budged much. They have been hovering around 4 percent since mid-October, and I think they'll move only marginally higher by the end of the year," says Paul Edelstein, director of U.S. financial economics at IHS Economics.

Toned-down expectations

Edelstein says yields on 10-year Treasury notes, which mortgage rates tend to follow, have stayed low because of predictions of continued weak inflation and concerns over the global economic health, especially in Japan and Europe. Investors typically seek safe-haven investments like U.S. Treasuries during times of uncertainty.

Featured Rates

Last week, a report showed that the European Union grew only at a 0.6 percent annualized rate in the third quarter, better than the previous period, but still anemic. Construction in Europe was down in the third quarter as well, and companies in Germany, the largest economy of the continent, said in a survey that they plan to cut back on investment spending next year.

Meanwhile, across the other pond ...

In Japan, the economy shrank 1.6 percent in the third quarter, prompting the country's central bank to ramp up its quantitative easing program to stimulate growth and the prime minister to try to delay an imminent increase in the country's consumption tax.

"If you don't see a pickup in inflation expectations and the problems in Japan and the eurozone persist, rates are going to move sideways," Edelstein said.

Closer to home

Stateside, good news has come from the housing front. Homebuilders' confidence in the housing market improved in November, coming back from its largest decline since February in the previous month, according to a survey Tuesday from the National Association of Home Builders.

On Wednesday, the Commerce Department said that the number of newly started single-family homes rose 4.2 percent in October, representing the best pace since November 2013. The number of permits for new single-family homes also rose, increasing 1.4 percent and offering another sign of optimism.

Suddenly, people are borrowing

The volume of mortgage applications also increased last week by 4.9 percent, according to the Mortgage Bankers Association on Wednesday. That included a 12 percent uptick in purchase applications.

"We're seeing a lot of buyers across the board," said Pava Leyrer, training and development manager for Northern Mortgage Services Inc. in Grand Rapids, Michigan. "We're getting a lot of older buyers, too. I just had a couple in their 80s take out a 30-year mortgage to buy a condo."

The MBA also said that refinance applications last week edged up a percent and accounted for 61 percent of the activity, down from 63 percent the week before.

Buyer-refinancer parity

David Cary, a mortgage broker with C2 Financial Corp. in California, is seeing a fair balance between those who want to buy and those who want a new loan. Recently, he's seen several borrowers move from a seven-year adjustable-rate mortgage into a 30-year fixed mortgage, partly over worries about an eventual rise in interest rates.

"Sometimes people need to sleep well at night, and that's just as important as any financial concern," he says, adding about rates, "I think we'll be right here at the end of the year. That's the likeliest outcome."


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