Figures reflect recession fears, says Freddie Mac chief economist
Mortgage rates nosedived by over half a percentage point from the previous month’s record high, marking the biggest decline since 2008.
Freddie Mac reported that the average 30-year fixed-rate mortgage plunged to 5.30%, down from 5.70% last week and 51 basis points below the 5.81% peak in June. This tops the big weekly decline recorded in December 2008, when the benchmark 30-year rate fell from 5.97% to 5.53%.
Read more: Fixed mortgage rates climb again – how is the housing market faring?
“Over the last two weeks, the 30-year fixed-rate mortgage dropped by half a percent, as concerns about a potential recession continue to rise,” said Freddie Mac chief economist Sam Khater. “While the drop provides minor relief to buyers, the housing market will continue to normalize if home price growth materially slows due to the combination of low housing affordability and an expected economic slowdown.”
The average 15-year fixed-rate mortgage (FRM) and five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) also posted significant drops this week.
The 15-year FRM averaged 4.45%, down from 4.83% a week ago and up from 2.20% last year. The five-year ARM slipped 31 basis points week over week to 4.19%. At this time a year ago, the five-year mortgage rate was 2.52%.
Despite the decrease in rates, demand for mortgage loans continued to suffer. Overall mortgage loan application volume fell 5.4% on a seasonally adjusted basis, according to the Mortgage Bankers Association. Refinance applications edged down by 8% and purchases slid by 4%.
“Rates are still significantly higher than they were a year ago, which is why applications for home purchases and refinances remain depressed. Purchase activity is hamstrung by ongoing affordability challenges and low inventory, and homeowners still have reduced incentive to apply for a refinance,” said Joel Kan, AVP of economic and industry forecasting at MBA.
