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US mortgage rates dip to lows not seen in more than a month

Latest data released by Freddie Mac shows 30-year fixed-rate average sinking to 4.81% with an average 0.4 point

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Mortgage applications are flat, according to the latest data from the Mortgage Bankers Association, with the market composite index declining 0.1 per cent from a week earlier.

Washington

MORTGAGE rates experienced the biggest one-week drop in nearly four years after stock market volatility rattled investors.

According to the latest data released on Thursday by Freddie Mac, the 30-year fixed-rate average sank to 4.81 per cent with an average 0.4 point. (Points are fees paid to a lender equal to one per cent of the loan amount.)

It was 4.94 per cent a week ago and 3.92 per cent a year ago. The 30-year fixed rate has fallen to its lowest level in seven weeks.

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The 15-year fixed-rate average dropped to 4.24 per cent with an average 0.5 point. It was 4.36 per cent a week ago and 3.32 per cent a year ago. The five-year adjustable rate average fell to 4.09 per cent with an average 0.3 point. It was 4.14 per cent a week ago and 3.22 per cent a year ago.

When the stock market is fitful, investors are inclined to park their money where it is safe, such as in long-term bonds.

As demand pushes up bond prices, yields fall, and the yield on the 10-year Treasury has been in a persistent decline.

It has receded for six straight days before plateauing at 3.06 per cent on Tuesday. Because mortgage rates tend to follow the same path as bond yields, they also tumbled.

"The global rout of stocks has yet to subside - with stocks now down for the year - which caused mortgage rates to slide and approach the bottom of their recent trading range, as investors sought safer assets," said Aaron Terrazas, a senior economist at Zillow.

"Despite a slew of strong economic releases over the past few months, especially in the labour market, investors appear to be growing increasingly wary of the global economy's ability to maintain recent growth and are resetting their expectations accordingly. For now, however, rates remain near their highest levels since 2011 and a December rate increase (by the US Federal Reserve) is all but inevitable."

Home buyers hoping that rates will continue to slide are likely to be disappointed.

Bankrate.com, which puts out a weekly mortgage rate trend index, found that two-thirds of the experts whom it surveyed say that rates will remain relatively stable in the coming week.

Jim Burrington, a mortgage loan officer at Grande Financial, is one who predicts rates will hold steady. "Mortgage rates are at their lowest point in a month," he said. "However, it seems like we have reached a temporary floor when it comes to mortgage rates and Treasury yields. Given how much they have dropped in the last week and the fact that there is a lack of data this week and that trading volumes will be light because of the Thanksgiving holiday, I don't see much of a chance for further improvement."

Meanwhile, mortgage applications were flat, according to the latest data from the Mortgage Bankers Association. The market composite index - a measure of total loan application volume - declined 0.1 per cent from a week earlier.

The refinance index fell 5 per cent from the previous week to its lowest level since December 2000. The purchase index rose 3 per cent. The refinance share of mortgage activity accounted for 38.5 per cent of all applications.

"The recent stock market volatility is likely causing some potential buyers to be more cautious," said Mike Fratantoni, MBA's chief economist. "Purchase mortgage applications continued their recent trend of falling slightly below year-ago levels." WP