Mortgage rates are dropping, for reasons that we should not exactly be thrilled about. More on that in a minute.
According to Bankrate.com’s weekly national survey, mortgage rates were down slightly for the second week in a row last week, with the benchmark 30-year fixed mortgage rate dropping to 4.11 percent, from 4.13 percent the week before.
The larger jumbo 30-year fixed slid to 4.06 percent, and the average 15-year fixed mortgage rate sank to 3.31 percent. Adjustable mortgage rates were mostly lower, with the 5-year ARM retreating to 3.52 percent while the 10-year ARM dropped to 3.91 percent.
Bankrate said that mortgage rates were slightly lower as the focus has been on corporate earnings, political dysfunction, and the rising stock market.
There has been no change to the backdrop of a slow growth economy with low inflation – the forces that have kept long-term bond yields and mortgage rates at such low levels. Mortgage rates are closely related to yields on long-term government bonds.
Even Fed Chair Janet Yellen was perceived to be more dovish in her recent Congressional testimony, though she continues to feel that the inflation pullback is a temporary rather than lasting phenomenon.
At the current average 30-year fixed mortgage rate of 4.11 percent, the monthly payment for a $200,000 loan is $967.56.
This is great news for homebuyers, but we have to take note that the reason mortgage rates are down is that the giddy enthusiasm that greeted 2017 has turned into a measure of doubt. The U.S. economy is reasonably strong, but not strong enough yet to push inflation higher, (and with it, interest rates).
Political uncertainty over healthcare, tax reform and other issues is now pushing markets into a holding pattern.