Significant drop in mortgage rates as economic doubts thrive

Mortgage rates tumbled to lows not seen since November 2016 as benchmark 10-year Treasury yields continue to decline due to investors' uncertainty over trade and the economy, according to Freddie Mac.

The 30-year fixed-rate mortgage averaged 3.6% for the week ending Aug 8, down from last week when it averaged 3.75%. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.59%.

"There is a tug of war in the financial markets between weaker business sentiment and consumer sentiment. Business sentiment is declining on negative trade and manufacturing headlines, but consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall," Sam Khater, Freddie Mac's chief economist, said in a press release.

Investors had been pushing bond yields down in recent weeks in anticipation of the Federal Reserve easing monetary policy, said Zillow economist Matthew Speakman when that company released its own rate tracker.

"This week, however, rates fell sharply after the U.S. and China each took steps to escalate their months-long dispute. Just a few months ago, it appeared that the two nations were on the cusp of a trade deal. Today, they are at an impasse, with an agreement nowhere in sight. This week's escalation of the conflict greatly overshadowed a series of market-moving economic reports — including July's jobs data, typically the most-watched report each month — and pushed mortgage rates down sharply, as investors sought the safe haven of government bonds," he said.

"With a light dose of economic data on deck for the coming week, the market's attention will likely remain on gauging the impact of the trade war on the global economy," Speakman said, adding that with the prospect of further rate cuts by central banks worldwide, it is likely "these multiyear low mortgage rates will be with us for a while."

The 15-year fixed-rate mortgage averaged 3.05%, down from last week when it averaged 3.2%. A year ago at this time, the 15-year fixed-rate mortgage averaged 4.05%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.36% with an average 0.3 point, down from last week when it averaged 3.46%. A year ago at this time, the five-year ARM averaged 3.9%.