Mortgage rates drop as market oscillates

Mortgage rates dropped this week after the stock market turmoil that began in China and spread everywhere.

China's market continues downward spiral

Chinese stocks have been plummeting this week, which has caused a domino effect on a global scale. U.S. stocks also tumbled, prompting investors to flock to government bonds, which sent prices up and yields down. The 10-year Treasury yield fell below 2 percent for the first time since late April but has since rebounded.

"The huge swings on the equity side have translated into huge swings on our side, which can be a good thing," says Brett Sinnott, vice president of capital markets for CMG Financial, a mortgage banking company in San Ramon, Calif.

A look at rates this week

* The benchmark 30-year fixed-rate mortgage fell to 4.03 percent from 4.06 percent, according to Bankrate's Aug. 26 survey of large lenders. A year ago, it was 4.23 percent. Four weeks ago, the rate was 4.09 percent.

The mortgages in this week's survey had an average total of 0.18 discount and origination points. Over the past 52 weeks, the 30-year fixed rate has averaged 4.02 percent. This week's rate is 0.01 percentage points higher than the 52-week average.

* The benchmark 15-year fixed-rate mortgage fell to 3.19 percent from 3.28 percent.

* The benchmark 30-year fixed-rate jumbo mortgage fell to 3.92 percent from 3.97 percent.

* The benchmark 5/1 adjustable-rate mortgage fell to 3.16 percent from 3.24 percent.

More strong housing data

Sales of new single-family houses rose 5.4 percent from June to July, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development. Sales are up 25.8 percent compared with the same time last year.

Home prices are also on the upswing. According to the June Standard & Poor's/Case-Shiller home-price index, prices rose 4.5 percent year over year.

"Recent housing data continues to show a strengthening housing sector," David Nice, economist and vice president at Mesirow Financial in Chicago, says in a blog post. "This can't come at a better time, as it provides some soothing and stabilizing news in the face of recent volatility in the global equity markets."

Get in where you fit in

Mortgage applications inched up 0.2 percent last week compared with the previous week, according to the Mortgage Bankers Association's weekly survey. A rise in government purchase loans led the increase; Federal Housing Administration and Veterans Affairs purchases were up 5.6 percent and 5.2 percent, respectively.

Business has been chaotic because of the recent stock market events, says Pava Leyrer, chief operating officer for Northern Mortgage Services in Grandville, Mich.

"People are going crazy over trying to either lock in, or (asking) what can they do, or changing terms," she says.

It might be a good time to lock in your rate, Sinnott advises.

"A lot of lenders have policies in place (stating) that should rates improve by a certain amount, that you can take advantage of it."

But don't obsess too much over the interest rate attached to your loan, Leyrer says.

"Take what you can get and go with it," she says. "Don't look back; look forward. Look to the excitement of your new home, not to whether or not you could have saved $10 or $20 off your payment."