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US mortgage rates hold steady, could be primed to move lower

Continuing trade tensions and recession fears are putting pressure on consumer spending, hitting borrowing costs

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According to the latest data released by Freddie Mac, the 30-year fixed-rate average ticked up to 3.65% with an average 0.6 point. It was 3.64% a week ago and 4.71% a year ago. The 15-year fixed-rate average slipped to 3.14% with an average 0.5 point. It was 3.16 per cent a week ago and 4.15 per cent a year ago.

Washington

MORTGAGE rates in the US barely budged this week despite downward pressure from lacklustre economic news.

According to the latest data released on Thursday by Freddie Mac, the 30-year fixed-rate average ticked up to 3.65 per cent with an average 0.6 point. (Points are fees paid to a lender equal to 1 per cent of the loan amount and are in addition to the interest rate.) It was 3.64 per cent a week ago and 4.71 per cent a year ago.

The 15-year fixed-rate average slipped to 3.14 per cent with an average 0.5 point. It was 3.16 per cent a week ago and 4.15 per cent a year ago. The five-year adjustable rate average was unchanged at 3.38 per cent with an average 0.4 point. It was 4.01 per cent a year ago.

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A US Commerce Department report released last week showed that consumer spending cooled in August. Then, the Institute for Supply Management released its manufacturing index for September, which fell to its lowest level since June 2009.

Economists blamed the slowdowns on continued trade tensions, and investors worried the contractions might signal a looming recession.

With investors moving towards safer assets, the price of US Treasurys rose and yields fell. The yield on the 10-year bond dipped to 1.6 per cent on Wednesday. Two weeks ago, it was 1.8 per cent.

Mortgage rates tend to follow the path of the 10-year Treasury, but like last month, they have not dropped as far.

"A slew of weak economic data stoked fears of an economic slowdown and pushed investors to safer assets," said Matthew Speakman, a Zillow economist.

"Friday's disappointing consumer spending release and Tuesday's report on manufacturing activity, which hit a 10-year low, were the most impactful. With September's jobs report due Friday, markets remain on edge, which will likely bring more significant rate swings."

Bankrate.com, which puts out a weekly mortgage rate trend index, found that nearly three-quarters of the experts it surveyed predict rates will fall in the coming week.

"Recession fears are causing money to flow from the stock market into bonds and, as a result, mortgage bonds are benefiting," said Elizabeth Rose, a certified mortgage planning specialist at AmCap Home Loans in Texas.

"From a technical standpoint, breaking through resistance levels to even lower rates may be a long shot. However, there (are) certainly good signals for some small gains within the current range."

Meanwhile, mortgage applications picked up after rates fell last week. According to the latest data from the Mortgage Bankers Association (MBA), the market composite index - a measure of total loan application volume - increased 8.1 per cent from a week earlier.

The refinance index jumped 14 per cent, while the purchase index ticked up 1 per cent. The refinance share of mortgage activity accounted for 58 per cent of all applications.

"Fuelled by low rates and solid homebuyer demand, this fall's mortgage market continues to be busy," said Bob Broeksmit, MBA's president and chief executive officer.

"Mortgage applications for both refinances and home purchases increased last week, and the year-over-year gains were even more impressive. With rates expected to stay around 4 per cent, overall activity in the final three months of 2019 should stay solidly above last year's levels, when borrowing costs were much higher," he added. WP