Mortgage rates held steady as Treasury yields dropped

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Mortgage rates remained near three-year lows last week, but their movement did not mirror the period's big shifts in the 10-year Treasury yield.

30-Year FRM 15-Year FRM 5/1-Year ARM
Average Rates 3.58% 3.06% 3.31%
Fees & Points 0.5 0.5 0.4
Margin N/A N/A 2.74

A pair of rate trackers went in different directions. The Freddie Mac Primary Mortgage Market Survey had a 3-basis-point increase in the rate for 30-year conforming mortgages compared with last week, while Zillow's own rate tracker fell 6 basis points.

Meanwhile, the 10-year Treasury yield fell from 1.61% on Aug. 22 to 1.51% on Aug. 28. But the rate closed at 1.49% on Aug. 27 and during the day on Aug. 28 fell as low as 1.47%.

"Rates remain near three-year lows, but in recent weeks have not dropped nearly as low as we would expect given the fact that bond yields have fallen markedly over the same timeframe," said Zillow economist Matthew Speakman when that company released its own rate tracker. "The connection between Treasury yields and mortgage rates — two metrics that typically move in unison — has frayed in recent weeks, in part due to increased refinancing activity weakening investor demand for mortgages, resulting in higher-than-expected rates."

The 30-year fixed-rate mortgage averaged 3.58% for the week ending Aug 29, up from last week when it averaged 3.55%, according to Freddie Mac. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.52%.

The rates quoted to consumers on Zillow's mortgage marketplace for the 30-year loan was an average of 3.72% on Aug. 28.

"Low mortgage rates along with a strong labor market are fueling the consumer-driven economy by boosting their purchasing power, which will certainly support housing market activity in the coming months," Sam Khater, Freddie Mac's chief economist, said in a press release.

The 15-year fixed-rate mortgage averaged 3.06%, up from last week when it averaged 3.03%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.97 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.31% with an average 0.4 point, down from last week when it averaged 3.32%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.85%.

In the short-term, rates should remain stable, but there could be some sharp movements late next week.

"It's likely that these muted movements in the mortgage market will persist into the long Labor Day weekend, but Thursday's second reading of second quarter gross domestic product and Friday's inflation and consumer spending reports all have the potential to jostle rates free of this recent mundanity. Consumers have powered the economy of late as manufacturing and investment have weakened. A strong spending report would act as compelling evidence that consumers remain confident amid growing economic uncertainty and would likely nudge rates higher," Speakman said.

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Mortgage rates forecast Mortgage rates Purchase Purchasing power Refinance Freddie Mac Zillow