Workers build a home in Rancho Santa Fe. (Sam Hodgson / Bloomberg )
Mortgage rates dropped slightly during the first half of this week in reaction to news of slower growth in the economy, with lenders offering the 30-year fixed-rate loan at an average 3.54%, down from 3.57% a week ago, according to Freddie Mac’s latest survey.
The typical 15-year fixed rate fell from 2.76% to 2.74%, the mortgage financier said, amid indications the rates would continue to ease in the coming week.
Quiz: Test your knowledge of home loans
This week’s Institute for Supply Management indexes showed slower growth in the manufacturing and non-manufacturing sectors, noted Freddie Mac Chief Economist Frank Nothaft.
Payroll processor ADP said Wednesday that hiring in the private sector was less than analysts had expected. And the government’s weekly report on jobless claims, released Thursday, showed them spiking to a four-month high of 385,000.
The downbeat economic news sent stocks lower by about 1% on Wednesday and triggered a decline in bond yields, which fall when demand for bonds increases. The yield on the 10-year Treasury note, regarded as a benchmark for mortgage rates, dropped below 1.8% Thursday morning after spending the first half of March above 2%.
In a Bankrate.com survey of mortgage professionals, four out of five said they believed rates would drop or hold steady in the coming week.
Michael Becker, a mortgage banker at WCS Funding Group in Baltimore, said the ADP and ISM reports indicated that the widely watched nonfarm payroll report from the government also would show weakness when it is released Friday.
“If job growth softens in the U.S., and the economies of Europe continue to weaken as they have over the past few months, then we will see bond yields drop,” Becker told Bankrate. “This will lead to lower mortgage rates in the coming week.”
Freddie Mac asks lenders early each week about the mortgage terms they are offering to solid borrowers who would pay less than 1% of the loan amount in upfront lender fees and points, with down payments of at least 20% or 20% equity in the home if they are refinancing.
Consumer loan delinquencies fall
Interest rate on key student loan could double
Banks not complying with mortgage settlement, survey finds