Fed chief is in no hurry to raise rates, so mortgages fall

What the Fed said

Federal Reserve Chair Janet Yellen made headlines this week after suggesting the central bank may increase the federal funds rate more slowly than previously expected.

“Reflecting global economic and financial developments since December … the pace of rate increases is now expected to be somewhat slower,” Yellen said Tuesday in remarks to the Economic Club of New York.

The news prompted investors to purchase government bonds, which sent prices higher and yields lower.

Mortgage rates are closely tied to the yields on long-term government bonds.

A look at this week’s rates

• The benchmark 30-year fixed-rate mortgage fell to 3.83 percent from 3.9 percent, according to Bankrate’s March 30 survey of large lenders. A year ago, the rate was 3.82 percent. Four weeks ago, it was also 3.82 percent. The mortgages in this week’s survey had an average total of 0.17 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4 percent. This week’s rate is 0.17 percentage points lower than the 52-week average.

• The benchmark 15-year fixed-rate mortgage fell to 3.09 percent from 3.13 percent.

• The benchmark 30-year fixed-rate jumbo mortgage fell to 3.76 percent from 3.81 percent.

• The benchmark 5/1 adjustable-rate mortgage fell to 3.28 percent from 3.36 percent.

Home sales up, mortgage apps down

Pending home sales rose 3.5 percent from January to February, to their highest level in seven months, according to data from the National Association of Realtors. The year-over-year increase was only 0.7 percent, however.

“After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory,” NAR chief economist, Lawrence Yun says in a statement.

Mortgage applications ticked down 1 percent last week from the previous week, according to the Mortgage Bankers Association’s weekly survey. Purchases rose 2 percent while refinances fell by 3 percent.

The current interest rate environment means that potential borrowers can afford to take their time before committing to anything, Sinnott says.

“With house prices dropping and rates staying at very stable levels it really gives them an advantage, especially on the purchase side,” he says.

On the other hand, you may want to act fast, advises Pava Leyrer, chief operating officer at NorthernMortgage Services in Grandville, Mich.

“Get out there and get your house before someone else does.”