WASHINGTON — Average long-term U.S. mortgage rates dropped this week to their lowest levels since May, in a week marked by turmoil in global markets that was stoked by economic developments in China.
Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage fell to 3.84 per cent from 3.93 per cent a week earlier. The benchmark rate hasn't been that low since May 21.
The rate on 15-year fixed-rate mortgages declined this week to 3.06 per cent from 3.15 per cent.
The panic selling and extreme gyrations in stock markets sent investors to the safety of U.S. government bonds, raising their prices and dampening their rates. Mortgage rates often track the yield on the 10-year Treasury bond, which dipped below 2 per cent on Monday, a day of epic losses and price swings on Wall Street. The yield recovered to 2.18 per cent Wednesday. That compared with 2.22 per cent last Wednesday.
On Monday, a brief 1,000-point plunge in the Dow Jones industrial average just minutes after stocks opened for trading sent shivers from Wall Street to Main Street. The average ended the day down 3.6 per cent. The market staged a robust recovery Wednesday, clocking its best day in nearly four years as the Dow average gained 4 per cent.
The recent economic jitters and stomach-churning markets have thrown into question whether the Federal Reserve will raise a key interest rate next month, as has been long anticipated. A rate hike by the Fed could bring higher rates for home loans. The Fed has kept its key short-term rate near zero since the financial crisis year 2008.
Steady U.S. job growth and low mortgage rates have improved home sales this year. Data issued Thursday by the National Association of Realtors showed that slightly more Americans signed contracts to buy homes in July, as pending sales edged up after dipping in June.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 per cent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.6 point. The fee for a 15-year loan also held steady at 0.6 point.
The average rate on five-year adjustable-rate mortgages fell to 2.90 per cent from 2.94 per cent; the fee fell to 0.4 per cent from 0.5 point. The average rate on one-year ARMs was unchanged at 2.62 per cent; the fee held at 0.3 point.
The Associated Press