Mortgage rates dropped to the lowest level since mid-February, a reflection of the waning optimism among investors about the state of the economic recovery from the pandemic.
The 30-year fixed-rate mortgage averaged 2.9% for the week ending July 8, down eight basis points from the previous week, Freddie Mac FMCC, -5.08% reported Thursday. It’s a major shift from two weeks ago when the 30-year loan rose above 3% for the first time since April.
The 15-year fixed-rate mortgage fell six basis points to an average of 2.2%, while the 5-year Treasury-indexed hybrid adjustable-rate mortgage slid by two basis point to an average of 2.52%.
“Mortgage rates now sit near their lowest level since February, fully reversing the sharp upward movements from earlier in the year,” said Matthew Speakman, an economist with Zillow Z, -3.19% ZG, -3.75%.
“While longer-term changes in rates are likely to be to the upside, the shift in the market’s outlook suggests that rates have little reason to move sharply higher anytime soon,” he added.
The decline in mortgage rates mirrored movements in long-term bond yields, including the 10-year Treasury note TMUBMUSD10Y, 1.341%. Over the past week, the yields on long-term debt have fallen, with the 10-year note headed for a five-month low as of Thursday.
“Rates slipped as investors realized that the last Fed discussion may not have been as hawkish as was originally believed,” said Realtor.com chief economist Danielle Hale. She added that mortgage rates are likely to bounce around the 3% mark through August at least, given that the Fed is unlikely to lay out a timeline for when it will begin to wind down its stimulus efforts including the purchasing of mortgage-backed securities. That purchasing activity has allowed mortgage rates to fall and remain near record lows.
Low rates will continue to provide a lifeline to home buyers who are still grappling with an extremely challenging market. A new survey from Fannie Mae released Wednesday showed that Americans were growing even more pessimistic about the prospect of buying a home these days, in light of the low supply of listings and rising prices. Nevertheless, Fannie Mae FNMA, -3.57% chief economist Doug Duncan projected that home-buying demand would remain strong through the rest of 2021.
“Mortgage rates remain not too far from their historical lows, and consumers are expressing even greater confidence about their household income and job situation compared to this time last year, when the pandemic had shut down wide swaths of the economy,” Duncan said.