NEW YORK (Reuters) - Interest rates on U.S. 30-year fixed-rate mortgages declined from seven-year highs as Treasury yields have fallen because of concerns about a global trade war and anxiety about political turmoil in Italy and Spain, Freddie Mac said on Thursday.
Thirty-year mortgage rates averaged 4.56 percent in the week ended May 31, down from the prior week’s 4.66 percent, which was the highest level since the week of May 5, 2011, the U.S. mortgage finance agency said.
Fifteen-year mortgage rates averaged 4.06 percent, down from 4.15 percent the prior week, while five-year adjustable rates averaged 3.80 percent, lower than 3.87 percent the week before.
“The decline was driven by recent trade and geopolitical issues, which led to a sudden decrease in long-term Treasury yields,” Freddie Mac’s chief economist, Sam Khater, said in a statement on the first decline in home borrowing costs in four weeks.
Benchmark 10-year Treasury yield US10YT=RR fell to 2.839 percent early Thursday, down 0.5 basis point on the day. On May 18, it reached 3.128 percent, which was the highest since July 2011, prompted by worries about rising inflation and federal borrowing, Reuters data showed.
In recent days, U.S. bond yields have declined on safe-haven demand for U.S. government debt on escalating tension between the United States and its major trade partners.
Italy’s struggle to form a government and Spanish Prime Minister Mariano Rajoy facing a no-confidence vote raised investor worries about the prospects of the No. 3 and No. 4 economies in the euro zone.
The latest market turbulence has not caused a meaningful dent in U.S. housing demand as domestic labor conditions remain solid, Khater said.
“Meanwhile, confident American consumers shrugged off the market volatility, as purchase mortgage applications continued to trend higher from a year ago,” he said.
On Wednesday, the Mortgage Bankers Association said its seasonally adjusted gauge on loan requests to buy a home fell 1.9 percent in the week ended May 25 from the prior week, but it was up 1.9 percent from a year ago.
Reporting by Richard Leong; editing by Chizu Nomiyama and Jonathan Oatis