How the Stock Market’s Wild Swings Have Helped Homebuyers
The rollercoaster week on Wall Street could pay off nicely for some homebuyers.
The sharp selloff in global markets, caused by the economic uncertainty in China, caused investors running for safety to buy up U.S. government bonds, driving interest rates down. That sent the rate on benchmark 30-year fixed-rate mortgages down to its lowest level since May.
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Mortgage giant Freddie Mac said Thursday that the average for 30-year fixed-rate loans fell to 3.84 percent, with an average 0.6 points, over the week ending August 27. That’s down from 3.93 percent last week and 4.10 percent a year ago. For 15-year fixed-rate loans, the average was 3.06 percent, down from 3.15 percent last week and 3.25 percent a year ago.
The average on 30-year fixed-rate mortgages has now been below 4 percent for five straight weeks. Just how long they stay there will be determined in part by when the Federal Reserve decides to raise interest rates for the first time since 2006. Many economists had expected the Fed to raise rates next month — but that was before the stock market’s latest shakeup.
"There are indications, though, that the unsettled state of global markets will make the Fed think twice before taking any action on short-term interest rates in September,” Sean Becketti, Freddie Mac’s chief economist, said in a statement. “If that's the case, the 30-year mortgage rate may remain subdued in the short-to-medium term, providing support for continued strength in the housing sector."
Related: Rate-Hike Havoc: Can the Fed Ignore This Market Rout?
Greg McBride, chief financial analyst with Bankrate.com, said mortgage rates may trend a bit higher from here as financial markets settle down, but he added that the Fed’s hike, whenever it comes, isn’t going to dramatically affect mortgage rates that are still historically low.
“That the initial move by the Fed is to a large extent already reflected in mortgage rates,” McBride said. “You might see a little bit of a further bump, but not much. Mortgage rates are not going to skyrocket. That’s the main point. Increases that we see in mortgage rates in the coming months are likely to be very limited."
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