Mortgage Rates Tick Down, But Can Borrowers Seize the Opportunity?

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Rates for home loans ticked down as the bond market moved sideways and the housing market made little headway.

The 30-year fixed-rate mortgage averaged 4.52% during the July 19 week, down one basis point, according to the weekly data from mortgage provider Freddie Mac. The 15-year fixed-rate mortgage averaged 4.00%, down from 4.02%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.87%, up one basis point.

Those rates don’t include fees associated with obtaining mortgage loans.

Mortgage rates follow the trajectory of the 10-year U.S. Treasury note. Bond yields have been subdued in recent weeks as Washington rachets up a trade war, nudging investors to seek safe haven assets. Bond yields fall as prices rise.

Bond strategists have mixed views on whether the recent rebound is temporary or likely to persist. Some think underlying fundamentals, like rising inflation, will re-assert themselves as trade war rhetoric cools down. But others viewed testimony from Federal Reserve Chair Jerome Powell Tuesday as a signal that the central bank sees an end to interest-rate increases coming sooner than markets may expect.

In the housing market, meanwhile, there’s little momentum up or down. Lower rates are a boon to borrowers, but no help if there’s still not enough inventory to satisfy years of pent-up demand. Data from the Commerce Department Wednesday showed home builders are in no hurry to ratchet up their pace of construction.

Many economists and housing-watchers think the current cycle has run its course, but there’s less agreement on exactly what that means.

Also on Thursday, the Joint Center for Housing Studies of Harvard University released a report showing that homeowner remodeling expenses will rise more than 7% this year. That’s thanks to surging levels of home equity and a rosier economy – but it’s also a reflection of the lack of homes available.

Buyers who want to move up to a nicer home or downgrade to a smaller one may be forced to remodel and make do with what they’ve got instead. That means annual spending on residential improvements and repairs by homeowners could reach nearly $350 billion by the middle of next year, the Harvard group said.

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