The rate on the most common mortgage plunged to a three-year low last week following Great Britain’s surprising popular vote to exit the European Union, according to two separate surveys that track the rate. That may help give a boost to the housing market.
Freddie Mac on Thursday said the 30-year mortgage rate dropped to 3.48 percent from 3.56 percent the week before, marking the lowest level since May 2013. Separately, Bankrate found that the 30-year and 15-year rate both sank to three-year lows.
The drop in mortgage rates follows the dramatic decline in the yield on the 10-year Treasury, which fell by almost a quarter-point after the “Brexit” vote. Spooked investors concerned about the fallout from the vote dumped money into the U.S. bond as a safety investment.
“We’re one-tenth of a percentage point away from all-time lows,” says Greg McBride, Bankrate’s chief financial analyst. “I doubt we will get a new record, but I don’t see rates moving up in any appreciable fashion for the balance of 2016.”
The drop in rates is fortuitous for homebuyers in the market, giving them a bit more purchasing power. It also comes as signs that housing is cooling begin to emerge.
“Mortgage rates have not been an impediment to the housing market, but for someone who is in the market, the timing couldn’t be better,” says McBride. “The main thing holding the housing market back is the lack of inventory of homes for sale and the lack in growth in household income.”
Pending home sales for May declined 3.7 percent from April and were down 0.2 percent from May 2015, marking the first year-over-year decline in nearly two years. The National Association of Realtors blamed the stiff competition and a dearth of homes for stifling selling activity.
The volume of mortgage applications to purchase a home slid again last week by 3 percent, the third consecutive weekly decline. And new home sales last week plummeted 6 percent in May as homebuilders offered more concessions during the month.
Existing home sales, though, showed strength in May, rising 1.8 percent from the month before, and remain 4.5 percent above last year’s level. Home price growth also remains robust. Nationally, home prices increased 5 percent in April and seven major cities set new highs for home prices.
That’s a good outcome for sellers and current homeowners, but the gains may price out many homebuyers.