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Mortgage rates in US decline amid turmoil in Greece and China
[WASHINGTON] Mortgage rates for 30-year loans in the US fell for the first time in three weeks as investors worried about political and financial turmoil in Greece and China turned to the relative safety of American debt.
The average rate for a 30-year fixed mortgage was 4.04 per cent, down from a 2015 high of 4.08 per cent last week, Freddie Mac said in a statement on Thursday. The average 15-year rate dropped to 3.2 per cent from 3.24 per cent, according to the McLean, Virginia-based mortgage-finance company.
Home-financing costs dropped as nervous investors sought the haven of US bonds. Debt-ridden Greece is struggling to say in the euro region and Chinese officials have been trying for more than a week to reverse a rout in stock prices. Increased competition for bonds is forcing investors to accept smaller yields, resulting in lower mortgage rates.
"Investors have decided we are the prettiest girl in the ugly-girl contest," said Lindsey Piegza, chief economist at Stifel Nicolaus & Co. in Chicago. "We're only going to see more uncertainty, not less, in coming weeks, so I don't see this as a short-term trend."
Bond investors also are speculating that turbulence in Europe and China will cause the Federal Reserve to delay the rate increases it planned for later this year. The Fed has kept the amount it charges banks for overnight lending at near zero since December 2008.
The International Monetary Fund on Tuesday said the Fed should put off a rate increase until next year, reiterating its view from early June. Europe's troubles have pushed the US dollar to a level that could "significantly debilitate" its economic growth as it cuts into exports, the IMF said in a report.
Federal Reserve officials three weeks ago discussed the potential risks from Greece and China, according to minutes of the Federal Open Market Committee's June 16-17 meeting released Wednesday.
Some officials "mentioned their uncertainty about whether Greece and its official creditors would reach an agreement and about the likely pace of economic growth abroad, particularly in China and other emerging market economies," according to the minutes. The discussion didn't deter the committee from projecting two rate increases for later this year.
The housing market has regained momentum after a drop in sales last year. Purchases of previously owned homes rose in May to the highest level since 2009, the National Association of Realtors reported last month. Sales of new houses climbed to the highest level since 2008, according to the Commerce Department.