Mortgage rates sliding lower this week

BY ADRIAN D. GARCIA/BANKRATE.COM

Several closely watched mortgage rates slid lower this week. The average rates on 30-year fixed and 15-year fixed mortgages both trended down. Meanwhile, the average rate on 5/1 adjustable-rate mortgages also sunk lower.

The average rate for a 30-year fixed mortgage is 3.74 percent, a decrease of 6 basis points since the same time last week. A month ago, the average rate on a 30-year fixed mortgage was lower, at 3.73 percent.

At the current average rate, you’ll pay principal and interest of $462.55 for every $100,000 you borrow. That’s $3.41 lower, compared with last week.

The average 15-year fixed-mortgage rate is 3.14 percent, down 6 basis points since the same time last week.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $697 per $100,000 borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much faster.

The average rate on a 5/1 ARM is 3.87 percent, ticking down 9 basis points over the last 7 days.

These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.

Monthly payments on a 5/1 ARM at 3.87 percent would cost about $470 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.

Michael Becker, a branch manager with Sierra Pacific Mortgage, is among the 30 percent of experts who believe rates will keep going down. He said, “No real surprises at the conclusion of the FOMC meeting. As expected, the Fed cut the federal funds rate by .25 percent. But, they hinted that they may pause their rate cuts. Their statement removed the clause that they were committed to ‘act as appropriate to sustain the expansion.’ There was not much movement in rates after the statement, so it appears we are back to looking at economic data. I think markets will tire of the constant statement from the White House saying a trade deal is imminent, and a small bond rally will come. There will be slightly better rates in the coming week.

Derek Egeberg, a certified mortgage planning specialist and branch manager at Academy Mortgage, is one of the 50 percent of experts who feel rates will hold steady. He said, “Like a ping pong match where the ball does not travel very far yet clears the same net over and over, mortgage rates have bounced above and below the same ‘net’ or technical line for the last two weeks, yet bonds have ended up right where they started. Look for rates to remain on this same “table” until more significant economic news becomes available.

Dick Lepre, a senior loan officer at RPM Mortgage, adds, “The techs are modestly bullish (higher prices, lower Treasury yields) but there remains a disconnect between Treasury yields and mortgage rates driven by a lack of liquidity. The GDP growth slowed because business investments slowed. While the cause of this is in South America and the EU, it has negative consequences here. The consumer is still sustaining GDP growth. A Fed easing is expected but with the Fed having to do repos to keep the Fed funds rate in its desired range it will be interesting to see what it needs to do to contain it 25 bps lower. As for mortgage rates, it is difficult to forecast these because of the liquidity problem. Treasury will still have first dibs on investments in fixed income securities.”

Logan Mohtashami, a senior loan officer with the AMC Lending Group, said, “For some time, I have been talking about this range in the 10-year yield between 1.43 percent to 1.94 percent being challenging to crack either way. We are making another attempt to break above 1.94 percent, which would be a big deal as unnecessary recession fears are leaving the marketplace with the 10-year yield at 1.81 percent after the Fed just cut rates again. If our domestic PMI data starts to show improvement like some of the European PMI data is beginning to, we can break above 1.94 percent. We aren’t there yet, but we are working on this as trade war escalation fears, for now, is leaving the marketplace. Keep an eye out on trade war news and our PMI data.”