The housing market is experiencing a boost in interested homebuyers, and this is likely due to the decreasing interest rates for home mortgages in the U.S. According to Freddie Mac's Primary Mortgage Market Survey, interest rates for home mortgages inched lower for the week ending Sept. 24.
"Global growth concerns and lackluster inflation convinced the Fed to defer a hike in the Federal funds rate," said Sean Becketti, chief economist at Freddie Mac. "In response, Treasury yields fell about 9 basis points over the week, with some larger day-to-day swings along the way. In response, the interest rate on 30-year fixed rate mortgages dropped by 5 basis points to 3.86 percent. Mortgage rates have remained below 4 percent for 9 consecutive weeks and have remained range-bound between 3.8 and 4.1 percent since May. These low mortgage rates have supported strong home sales, and 2015 is on pace to have the highest home sales total since 2007."
Rates Decrease for U.S. Home Loans
According to the survey, the average rate for a 30-year fixed-rate mortgage dropped to 3.86 percent from the previous week's rate of 3.91 percent. The current average is also notably lower than the 4.2 percent average interest rate for a 30-year FRM seen a year ago at this time.
The average 15-year FRM also dipped to 3.08 percent. This is down 0.03 percentage points when compared on a week-over-week basis.
Both 1-year Treasury-indexed and 5-year Treasury-indexed hybrid adjustable-rate mortgages decreased week-over-week. Their average rates settled at 2.91 percent and 2.53 percent respectively.
Lower Rates Attract More Buyers
The low rates have seemingly encouraged a higher number of interested buyers. According to The Mortgage Bankers Association's weekly survey, for the week ending Sept. 18, applications for home loans rose 13.9 percent from the previous week.
"We saw significant rate volatility last week surrounding the FOMC meeting, and rate declines toward the end of the week likely drove applications from both prospective home buyers and borrowers looking to refinance," said Mike Fratantoni, MBA's Chief Economist. "The 30-year fixed rate remained unchanged over the week even though there was substantial intra-week fluctuation, but we saw rate decreases in other loan products like the 15-year fixed, 5/1 ARM, and 30-year jumbo.
Refinancing applications represented the most significant share of total applications at 58.4 percent. This is 2.2 percentage points above the previous week's share of all home loan applications.
The adjustable-rate mortgage share of the week's applications rose to 6.9 percent.
While total applications increased for the week ending Sept. 18, the shares of loans through the Federal Housing Administration, Department of Veteran Affairs and the U.S. Department of Agriculture decreased slightly on a week-over-week basis.
While there were minimal slides in the share of some types of loans, the increasing shares of conventional loan applications may indicate a stronger economy where interested homebuyers feel more confident in their ability to afford a home.
More buyers may take steps toward homeownership and further bolster the real estate market as we continue into the fall season.