Rates for home loans fell to the lowest in over a year as investors remained concerned about economic headwinds, setting up the housing market for a strong spring season.
The 30-year fixed-rate mortgage averaged 4.35% in the February 21 week, mortgage guarantor Freddie Mac said Thursday. That was down from 4.37% in the prior week and the lowest since early February 2018. The popular product has eked out a weekly increase only once in 2019.
The 15-year adjustable-rate mortgage averaged 3.78%, down three basis points. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.88%, down from 3.84%.
Those rates don’t include fees associated with obtaining mortgage loans.
Mortgage rates move in near lockstep with the 10-year U.S. Treasury noteTMUBMUSD10Y, +0.00% although sometimes it takes the mortgage market a few days to catch up to the bond market.
Bond yields, which decline as prices rise, have been caught in “cross-currents,” in the words of Federal Reserve Chairman Jerome Powell. The dragged-out U.S.-China trade talks have helped boost the attractiveness of assets considered safe havens. And more recently, yields have declined as Federal Reserve officials increasingly speak out in favor of moderating the pace of reducing the bonds they hold on their balance sheet.
Still, investors are keeping a watchful eye on the supply of new Treasury bondshitting the market. The massive deficits created by the 2017 tax cuts and spending increases are being financed by more bond issuance, and excess supply could erode demand – and pricing power.
For now, though, there’s more buying than selling of Treasurys – good news for borrowers. (Here’s a look at how mortgage applications increase as rates decline, from last month.)
Even if mortgage rates behave, there are plenty of headwinds arrayed against would-be home buyers. Debt consolidator Freedom Financial’s Freedom Debt Relief subsidiary recently conducted a survey of consumer attitudes toward debt and the economy.
Survey respondents said that their combined debts – student loans, credit card balances, medical debt, and more – were among the big factors keeping them from buying a house. That was true for 26% of members of Generation X, 36% of Millennials, and 35% of Gen Y-ers, those born from 1995 on.
In a reminder of the economic forces stacked against consumers, survey respondents of all ages said affordable health care was their biggest priority, followed by wage growth. Respondents listed affordable housing third, after those two considerations.