As the Chinese government continued to devalue its currency and create major financial waves, long-term U.S. mortgage interest rates tumbled to their lowest level in two months, according to mortgage finance company Freddie Mac.
During the week ended August 27, 2015, the average rate on a 30-year fixed rate mortgage (FRM) sank to 3.84 percent, excluding fees, down from 3.93 percent the previous week and down from 4.10 percent the year before.
“Events in China generated eye-catching volatility in equity markets worldwide over the past week,” said Freddie Mac chief economist Sean Becketti. “Interest rates also rocked up and down — although to a lesser extent than equities — as investors alternated between flights to quality and bargain hunting among beaten-down stocks. Amidst all this confusion, the 30-year mortgage rate dropped to 3.84 percent, the lowest mark since May and the fifth consecutive week with a rate below 4 percent.”
Becketti also made it clear that the Chinese economic chaos could definitely keep rates low for the next few months. “Given the recent volatility, mortgage rates could change up or down significantly by the time this report is released,” he said. “There are indications though that the unsettled state of global markets will make the Fed think twice before taking any action on short-term interest rates in September. If that’s the case, the 30-year mortgage rate may remain subdued in the short-to-medium term, providing support for continued strength in the housing sector. Just this week, new home sales were reported to be up 26 percent year over year.”
Rates also fell in the latest week on 15-year FRMs. The average dropped to 3.06 percent, down from 3.15 percent a week earlier and 3.25 percent during the same week of 2014.
The one-year adjustable rate mortgage (ARM) average was unchanged at 2.62 percent, but up from last year’s 2.39 percent.