Mortgage rates drop after China devalues currency

Mortgage rates fell this week after China's economy suffered a major setback that disrupted international markets and U.S. consumers lost some optimism in their outlook on the housing climate.

The improvement in rates makes now an opportune time to buy, says Pava Leyrer, chief operating officer for Northern Mortgage Services in Grandville, Mich.

"Rates are still very good and very stable," she says.

Yuan loses value, consumer sentiment falls

China's economic troubles have created ripple effects elsewhere. U.S. government bond yields fell to near three-month lows after the central bank in China devalued its currency this week.

The 10-year Treasury bond yield fell from 2.23 percent Monday to around 2.09 percent Wednesday morning.

Consumers have grown a bit pessimistic about the housing market recently. The percentage of people who believe it's a good time to sell a home fell from 52 percent in June to 45 percent in July, according to Fannie Mae's July 2015 National Housing Survey. The share of consumers who think it's a good time to buy fell month over month, from 63 percent to 61 percent — a record low for the survey.

Last month's attitudes may have been influenced by the Greek debt crisis and China's stock market decline, says Doug Duncan, senior vice president and chief economist at Fannie Mae.

"Most of our key indicators are as strong (as) or stronger than they were at this time last year, which is indicative of an improving housing market this year," Duncan says in a statement.

A look at this week's rates

• The benchmark 30-year fixed-rate mortgage fell to 4.04 percent from 4.1 percent, according to Bankrate.com's Aug. 12 survey of large lenders. A year ago, the rate was 4.27 percent. Four weeks ago, it was 4.17 percent. The mortgages in this week's survey had an average total of 0.24 discount and origination points. Over the past 52 weeks, the 30-year fixed rate has averaged 4.03 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 3.26 percent from 3.28 percent.

• The benchmark 30-year fixed-rate jumbo mortgage fell to 4 percent from 4.02 percent.

• The benchmark 5/1 adjustable-rate mortgage fell to 3.2 percent from 3.24 percent.

Will the Fed's 'liftoff' be pushed back?

After watching U.S. economic data closely, Federal Reserve members had been hinting lately about an impending rate hike, which is widely predicted to happen at the policy-setting meeting in September.

"Fed Chair Janet Yellen has stated she expects conditions to jell, justifying a start to policy normalization sometime later this year," Atlanta Fed President Dennis Lockhart said in an Aug. 10 speech to the Atlanta Press Club. "I agree. I think the point of liftoff is close."

But the "liftoff" could be pushed back due to current global concerns.

"This really put a kink in their plan," says Brett Sinnott, vice president of capital markets at CMG Financial in San Ramon, Calif. "You can't always necessarily pay attention to the homefront; sometimes you've got to pay attention to what's going on in other countries and how they're reacting."

Time is on your side (for now)

Mortgage applications inched up 0.1 percent last week compared with the previous week, according to data from the Mortgage Bankers Association's weekly survey. Refinances rose by 3 percent, while purchases fell by 4 percent.

If you're in the market to buy a home, don't move too hastily, Sinnott says. There's a belief that the market has already accounted for the Fed's first rate hike, so there's still time to act before rates significantly increase.

There's a "lower risk (and) higher reward" for those who can wait and see how everything plays out, he says.

John Stearns, senior mortgage banker at American Fidelity Mortgage Services in Mequon, Wis., agrees that patience is needed but advises starting the homebuying process early by whipping your credit into shape and getting preapproved.

"You never know when that right home is going to appear on the radar," he says.