Weaker-than-expected economic data led to a decline in mortgage rates this week, although consumer attitudes remain strong, and should continue to drive increased home purchase demand, according to Freddie Mac.
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“Despite the economic slowdown due to weakening manufacturing and corporate investment, the consumer side of the economy remains on solid ground,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “The 50-year low in the unemployment rate combined with low mortgage rates has led to increased homebuyer demand this year. Much of this strength is coming from entry-level buyers — the first-time homebuyer share of the loans Freddie Mac purchased in 2019 is 46%, a two-decade high.”
Last week’s economic news was punctuated by the Oct. 3 release of the Institute for Supply Management’s Non-Manufacturing Index, an indicator of service sector activity, which came in weaker than expected.
“The news showed that a slowing manufacturing sector has begun to negatively affect the larger services sector, evidence that the economy is facing stronger resistance than previously estimated,” Matthew Speakman, a Zillow economist, said when that company released its own rate tracker. “In the days since, rates have oscillated in a range close to a three-year low.”
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.35% with an average 0.3 point, down from last week when it averaged 3.38%. A year ago at this time, the five-year adjustable-rate mortgage averaged 4.07%.
And more volatility in mortgage rates is possible following the data releases scheduled over the next seven days.
“Trade-related developments continue to shake markets, especially in weeks like this that are light on economic data. Amid increasing tension between the U.S. and China, trade discussions did see some progress this week, and rates nudged up slightly as a result. It’s likely that larger swings for mortgage rates are on the horizon as key consumer-related data releases — consumer sentiment on Friday and retail sales next Wednesday — are on deck,” Speakman said.