Fence-sitters, check out mortgage rates. They’re down

It’s time for homebuyers to jump off the fence: Mortgage rates fell just a little this week, making it a great opportunity to apply for a home loan.

The drop in mortgage rates happened because inflation is low, the Federal Reserve is expected to take steps to prevent inflation from popping up, and home construction sagged in April. All of these are signs that the economy isn’t in danger of overheating anytime soon. The prospect of a muddling-along economy keeps mortgage rates down.

Even as mortgage rates fell, fewer people applied for mortgages, according to the Mortgage Bankers Association. They are missing a chance to grab a low mortgage rate.

Good news on prices

When inflation is low, borrowers can smile because of low rates. Core consumer prices (excluding food and fuel) rose just 1.9 percent in April compared to a year before. That was the lowest reading for the core Consumer Price Index since August 2015.

“A lower-than-expected reading on consumer price inflation helped bring bond yields, and mortgage rates, a bit lower over the past week,” says Greg McBride, chief financial analyst for Bankrate.com. He says the Fed is keeping mortgage rates in check, too, because it’s poised to raise short-term interest rates next month. That would keep inflation under control, and put a lid on mortgage rates.

As for home construction, housing starts fell 2.6 percent in April.

And finally – in a nod to all of the drama in Washington — McBride adds that “there’s nothing like a good, old-fashioned political crisis to make investors nervous,” often bringing bond yields and mortgage rates lower.

The bottom line

For homebuyers and refinancers, the path is clear: The time is right to get a mortgage, because rates already were favorable, and they have dipped even lower.

In Bankrate’s weekly Rate Trend Index, a majority of mortgage experts predicted that rates will fall over the next week. Most of them cited political turmoil, which tends to push interest rates downward.

Mortgage rates this week

The benchmark 30-year fixed-rate mortgage fell this week to 4.15 percent from 4.22 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 3.76 percent. Four weeks ago, the rate was 4.16 percent. The 30-year fixed-rate average for this week is 0.29 of a percentage point below the 52-week high of 4.44 percent, and is 0.63 of a percentage point greater than the 52-week low of 3.52 percent.

The 30-year fixed mortgages in this week’s survey had an average total of 0.25 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.95 percent. This week’s rate is 0.20 percentage points higher than the 52-week average.

  • The 15-year fixed-rate mortgage fell to 3.35 percent from 3.44 percent.
  • The 5/1 adjustable-rate mortgage fell to 3.42 percent from 3.48 percent.
  • The 30-year fixed-rate jumbo mortgage fell to 4.08 percent from 4.16 percent.

At the current 30-year fixed rate, you’ll pay $486.10 for every $100,000 you borrow, down from $490.19 last week.

At the current 15-year fixed rate, you’ll pay $707.54 for every $100,000 you borrow, down from $711.94 last week.

At the current 5/1 ARM rate, you’ll pay $444.59 for every $100,000 you borrow, down from $447.93 last week.

Weekly national mortgage survey

Results of Bankrate.com’s weekly national survey of large lenders conducted May 17, 2017 and the effect on monthly payments for a $165,000 loan:

30-year fixed 15-year fixed 5-year ARM
This week’s rate: 4.15% 3.35% 3.42%
Change from last week: -0.07 -0.09 -0.06
Monthly payment: $802.07 $1,167.44 $733.58
Change from last week: -$6.74 -$7.26 -$5.50