Average mortgage rates continue to decline on economic worries

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Mortgage rates started 2019 by continuing their decline but as consumers worry about the broader economy that might not help to increase home sales, according to Freddie Mac.

30-Year FRM 15-Year FRM 5/1-Year ARM
Average Rates 4.51% 3.99% 3.98%
Fees & Points 0.5 0.4 0.2
Margin N/A N/A 2.78

The 30-year fixed rate mortgage averaged 4.51%, a drop of 4 basis points from the previous week. But this is still 56 bps higher than the average for the same week last year, which puts a damper on refinance activity.

"Low mortgage rates combined with decelerating home price growth should get prospective homebuyers excited to buy," Freddie Mac Chief Economist Sam Khater said in a press release. "However, it will be interesting to see how the recent turmoil in the stock market will affect homebuying activity in the coming months.

The Dow Jones Industrial Average has been on a roller coaster ride in recent weeks, and following the news that Apple cut its guidance for the fourth quarter, it plunged over 500 points in the first hour of trading on Jan. 3.

This turmoil has driven investors towards the bond market, where 10-year Treasury yields, last above 3% on Dec. 3, have plummeted. The yield, used as a benchmark for 30-year FRMs, was at 2.61% at 10:07 a.m. on Jan. 3, a drop of 5 bps since the previous day's close.

"Recent instability in global financial markets may finally be showing some signs of spilling over into the real economy: U.S. consumer confidence declined to a five-month low in December, and China’s main manufacturing index contracted for the first time in more than a year and a half," said Zillow Senior Economist Aaron Terrazas when that company released its rate tracker on Jan. 2. "Several Federal Reserve officials, including Chairman Jerome Powell, have scheduled speaking engagements in the next few days, which should provide insight into just how concerned the Fed is about these recent indicators and the impacts of the government shutdown."

But the employment report, which is to be released on Jan. 4 even with the Federal government shutdown could cause the negative views on the economy to shift.

"Strong jobs and wage growth data could easily slow the lower movement in rates and provide optimism that the economy is still on strong footing," Terrazas said.

The 15-year FRM averaged 3.99%, down 2 bps from the previous week, according to Freddie Mac. The five-year Treasury-indexed hybrid adjustable rate mortgage averaged 3.98%, with an average 0.2 point, down 2 bps from last week's 4%.

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Mortgage rates Purchase Housing market Refinance Freddie Mac Zillow Federal Reserve