Mortgages drift lower in summer doldrums
Mortgage rates snoozed again this week amid news that wary consumers are holding back on spending and more signs that the economy hasn't completely recovered.
30 year fixed rate mortgage – 3 month trend
- The benchmark 30-year fixed-rate mortgage fell to 4.27 percent from 4.29 percent last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.57 percent. Four weeks ago, it was 4.3 percent. The mortgages in this week's survey had an average total of 0.26 discount and origination points.
- The benchmark 15-year fixed-rate mortgage fell to 3.39 percent from 3.4 percent.
- The benchmark 5/1 adjustable-rate mortgage fell to 3.32 percent from 3.34 percent.
- The benchmark 30-year fixed-rate jumbo fell to 4.35 percent from 4.39 percent.
Many in the mortgage industry are surprised to see that rates have remained in a tight range for so long. The 30-year fixed rate has fluctuated between 4.27 percent and 4.34 percent since May, according to Bankrate's weekly survey.
"Rates are persistently, stubbornly low," says Bob Walters, chief economist for Quicken Loans. "If you asked a year ago, most people would say rates would be higher by now."
Why are rates so low?
There are several factors keeping a lid on rates, including stagnant wages, low inflation, weaker-than-expected consumer spending and political concerns abroad, Walters explains.
U.S. retail sales, which account for a third of consumer spending, were flat in July, the Commerce Department reported on Wednesday.
Even though the economy has added more than 200,000 per month for the past six months, investors remain concerned about economic growth in the United States. They also worry about the crisis between Ukraine and Russia.
When investors are worried, they seek safer investments such as Treasury and mortgage bonds. Normally, that helps keep rates low.
Are buyers ignoring the opportunity?
But even with rates near the bottom, the volume of mortgage applications decreased 2.7 percent last week from a week earlier, according to the Mortgage Bankers Association.
Buyer activity isn't as high as it should be, considering how low rates are, Walters says.
"Homebuying is still tied to employment and that's not where it should be," he says.
Home price appreciation slowed a bit in the second quarter of the year. The national median of previously sold homes increased 4.4 percent compared with the same period last year, the National Association of Realtors said Tuesday. That's the slowest pace since 2012, according to the NAR's report.
That's actually good news for those who are looking for a home to buy.
Lenders loosening up
Tight inventory has made it difficult for many of these buyers to compete with cash-paying investors. But at least it might be getting slightly easier to qualify for a mortgage, according to a Federal Reserve survey released recently. Although lending standards remain tighter than in 2005, they have eased somewhat in recent months, the survey shows.
"It has improved a little," says Michael Becker, branch manager for Sierra Pacific Mortgage in White Marsh, Maryland. He adds that a few lenders are now willing to lend to borrowers with credit scores below 600, depending on the circumstances.
"You are not seeing any stated-income or no-money-down loans," Walters says. "But I have seen more lenders softening some of their guidelines."