Average mortgage rates sustain their drop below last year's levels
The 30-year mortgage rate dipped lower than it was 12 months ago for the third week running, according to Freddie Mac's latest report.
|30-Year FRM||15-Year FRM||5/1-Year ARM|
|Fees and points||0.4||0.4||0.3|
The 30-year fixed-rate mortgage averaged 4.28% for the week ending March 21, down from the previous week, when it averaged 4.31%. A year ago, the average 30-year FRM rate was 4.45%.
The latest drop in the 30-year mortgage rate, continuing moderation in home prices and an imminent seasonal uptick in the housing market could help boost lenders' origination volume in the months ahead.
"The combination of improving affordability and more inventory than the last few spring selling seasons should lead to improved home sales demand," said Sam Khater, Freddie Mac's chief economist, in a press release.
However, upward pressure on long-term rates could re-emerge this fall.
In addition to signaling a cessation in short-term rate hikes, a statement released on Wednesday by the Federal Open Market Committee suggested the Fed could start rolling its securitized mortgage holdings into Treasury bonds starting in October.
The increase in the supply of mortgage-backed securities that could follow could put downward pressure on mortgage bond prices, and potentially boost rates.
"Fed officials have noted that they would like to return the balance sheet to primarily Treasury assets, meaning that MBS will continue to roll off, with the proceeds being invested in Treasury securities. The Fed also noted the potential to sell 'residual holdings' of MBS at some point, but that they would give plenty of notice before doing so. Over time, these changes could put some upward pressure on mortgage-Treasury spreads — and ultimately — mortgage rates," Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, said in a press release.
But continuing downward pressure on rates looks more likely to be the order of the day for now.
"Bond yields moved sharply downward after the Fed signaled that additional hikes to its benchmark rate were unlikely to occur this year and that it will stop the reduction of its balance sheet in the fall," Matthew Speakman, an economic analyst for Zillow, said in a press release.