Cheer Up, At Least Purchase Mortgage Rates are Now Below 5% | Omaha NE Homebuyer’s Guide

Rates declined this week to average 4.99%, down from last week’s 5.30%

Purchase mortgage rates dropped for the third consecutive week and are now below the 5% level, reflecting a Federal Reserve monetary policy that has led to a “technical recession” in the U.S. economy.

According to the latest purchase mortgage survey from Freddie Mac, the 30-year fixed-rate mortgage declined this week to average 4.99%, down from last week’s 5.30%. A year ago this time, rates averaged 2.77%. The index compiles rates reported by lenders during the past three days.

“Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth,” Sam Khater, chief economist at Freddie Mac, said in a statement.

He added, “The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment.”

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The Fed raised interest rates by 75 bps in its July’s meeting, marking its fourth rate hike this year as it attempts to control persistent inflation.

Consequently, the gross domestic product, a wide-ranging measure of economic activity, fell by 0.9% in the second quarter, marking the second decline. A total of two consecutive quarters of negative economic growth generally is considered a recession, though the Biden administration has pushed back on it, citing a strong labor market.

Mortgage rates tend to align with the 10-year U.S Treasury yield, which declined five basis points in one week to 2.73% Wednesday.

Borrowers are taking advantage of declines in mortgage rates, applying for more loans.

According to the Mortgage Bankers Association (MBA), the market composite index, a measure of mortgage loan application volume, increased 1.15% for the week ending July 29, after falling for four consecutive weeks to the lowest level in more than two decades. The refinance index rose 1.45% from the previous week, and the purchase index was up 0.97%.

On HousingWire’s Mortgage Rates Center, Black Knight’s Optimal Blue OBMMI pricing engine measured the 30-year conforming mortgage rate at 5.448% Wednesday, down from 5.596% the previous week. The 30-year fixed-rate jumbo was at 5.472% Wednesday, up from 5.165% the week prior, according to the Black Knight index.

According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.26% with an average of 0.6 point, down from last week’s 4.58%. The 15-year fixed-rate mortgage averaged 2.10% a year ago.

The 5-year ARM averaged 4.25% this week, down from 4.29% the previous week. The product averaged 2.40% a year ago.

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