Average mortgage rate drops to 5-month low

Mortgage Applications drop 1.8%

MBA: Mortgage Applications Fall 1.8%

The 30-year fixed mortgage has an average of 0.28 discount and origination points.

"Weak economic data and growing global tensions are driving investors out of riskier sectors and into Treasury securities", Sean Becketti, Freddie Mac chief economist, said in a statement.

Rates for home loans lurched lower, sending the benchmark below the key 4% threshold for the first time in six months, Freddie Mac said Thursday. That's driving yields lower. Coincident with the decline in Treasury yields, the average 30 yr mortgage rate fell 6 bps to 4.22%, a 21 week low. Rates on a 30-year FHA-backed fixed-rate loan fell from 4.14% to 4.09%.

The survey is complemented by Bankrate's weekly Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next seven days. Thirty-eight percent said they would fall, 38 percent said they would hold steady and 24 percent said they would rise. The adjustable-rate mortgage (ARM) share of activity decreased to 8.4% of all applications. The question is will this rally continue, or will rates quickly revert to the higher levels of just a few weeks ago.

The recent drop also illustrates the range of factors that affect mortgage rates.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.8 percent on a seasonally adjusted basis from one week earlier.

The MBA's refinance index increased by just 0.2% week over week, and the percentage of all new applications that were seeking refinancing rose from 41.6% to 42.4%.

The Refinance index increased 0.2% over the same period, while the seasonally adjusted and unadjusted Purchase indices decreased by 3%.

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