The 4% Mortgage Is Back
March 28 2019 - 10:30AM
Dow Jones News
By Ben Eisen
Mortgage rates are fast approaching 4%, a rate low enough that
economists and lenders believe it will help jump-start the housing
market again.
The average rate on a 30-year fixed mortgage fell to 4.06% this
week, its lowest since January 2018, according to data released
Thursday by Freddie Mac, the mortgage-finance giant. The rate was
down nearly a quarter point from a week earlier, its biggest drop
in over a decade.
In many cases rates are lower than 4%. Lenders advertising
mortgages at sub-4% rates this week include Toronto-Dominion Bank,
HSBC Holdings Plc and Teachers Federal Credit Union, according to
Bankrate.com.
Just a few months ago, average rates were on the verge of
hitting 5%, drying up refinancings and putting a damper on home
price growth. While the housing market remains cooler than it had
been at its peak, lower mortgage rates are again raising hopes for
a rebound as the spring selling season gets under way.
Mortgage rates have been declining along with the yield on the
benchmark 10-year Treasury note. The moves have been spurred by the
Federal Reserve's decision to pause its interest rate increases
along with investor malaise about the expected pace of economic
growth for the rest of the year.
That has created an opening for prospective buyers left on the
sidelines after rates jumped.
Drew Vaughn, of Glastonbury, Conn., locked in a rate of 3.99%
this week , after receiving a quote of 4.375% a week ago. That
amounts to a saving of more than $1,000 a year in interest.
"I was shocked," he said. The $388,000 mortgage is for a second
house he and his wife, Laura, are buying by the beach further south
in the state.
Mr. Vaughan's lender, Sanborn Mortgage Corp. in West Hartford,
has been advertising the sub-4% rate in recent days, and it has
spurred a lot of interest, according to Michael Menatian, the
company's president.
"People love it when they have a rate like that," Mr. Menatian
said. "Psychologically, it has a huge impact."
While mortgage rates have fallen, a housing-market rebound faces
other obstacles. After a brisk rise in home values in recent years,
median prices were unaffordable to the average earner in nearly
three-quarters of counties around the country in the first three
months of the year, according to an analysis by real-estate data
firm Attom Data Solutions.
Still, there are signs of newfound interest among prospective
borrowers as rates fall. Mortgage applications jumped 8.9% last
week from a week earlier, according to the most recent survey by
the Mortgage Bankers Association.
"It's such a big move in rates, it's prompting more potential
home buyers to step back into the market," said Joel Kan, the
associate vice president of economic and industry forecasting at
MBA.
Lower rates also are boosting refinancing applications, which
jumped 12% over that span. As of last week, 3.3 million homeowners
stood to save money by refinancing their mortgages, the most since
January 2018, according to Black Knight Inc., a mortgage-data and
technology firm.
A renewed boom in the mortgage market would be a benefit to
lenders that were hard hit last year as rates rose. Roughly half of
mortgages these days are originated by nonbank firms, which, unlike
banks, don't have other lines of business or large balance sheets
to fall back on when business dries up. Many depended
disproportionately on refinancings and had to slim down or merge as
rates rose.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
March 28, 2019 10:15 ET (14:15 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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