After rising the week before, long-term mortgage rates fell in the latest week on mixed economic data, a move that helped push applications for purchase mortgages higher.
The average interest rate on a 30-year fixed rate mortgage sank to 4.34 percent, excluding fees, according to mortgage backer Freddie Mac, a three-week low, down from 4.41 percent the previous week. While still very historically low, rates have moved up considerably from a year ago when they averaged 3.43 percent.
The drop in rates came in reaction to a mix of positive and negative market data, according to Freddie Mac. “Mortgage rates eased a bit following the decline in 10-year Treasury yields,” commented Freddie Mac vice president and chief economist Frank Nothaft in a statement. “Also, the economy added 192,000 jobs in March, which was below the market consensus forecast but followed an upward revision of 22,000 jobs in February. Meanwhile, the unemployment rate held steady at 6.7 percent.”
Lower interest rates paved the way for more home purchases, as this week the Mortgage Bankers Association reported a three percent increase in its Purchase Index, a measure of total home purchase mortgage request volume. Part of that increase may simply be attributed to the beginning of the spring buying season, but lower rates certainly make purchases more enticing.
At the same time however, the MBA’s Refinance Index declined five percent and has fallen to a low not seen since July 2009. Refinance requests made up 51 percent of all mortgage applications this week, down from 53 percent the week before and is down 14 percent from April 2013. Refinance loans have made up the bulk of mortgage applications since the Great Recession, but as the housing market recovers and rates are trending slowly upward, home purchase requests should start to balance out refinancing.