Mortgage rates fall as investors flee to the safety of bonds

Homebuyers can thank Apple for this week’s dip in mortgage interest rates.

Apple spooked U.S. stock market investors with less-than-expected earnings, triggering a sell-off in equities, flight to the bond market and subsequent rate drop.

Mortgage rates this week

• The benchmark 30-year fixed-rate mortgage fell to 3.77 percent from 3.83 percent, according to Bankrate’s May 4 survey of large lenders. A year ago, it was 3.99 percent. Four weeks ago, the rate was 3.75 percent. The mortgages in this week’s survey had an average total of 0.2 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 3.99 percent.

This week’s rate is 0.22 percentage points lower than the 52-week average.

■ The benchmark 15-year fixed-rate mortgage fell to 3.01 percent from 3.05 percent.

■ The benchmark 5/1 adjustable-rate mortgage fell to 3.14 percent from 3.21 percent.

■ The benchmark 30-year fixed-rate jumbo mortgage remained at 3.76 percent.

Investors move to bonds

Apple reported revenue of $50.6 billion and net income of $10.5 billion, or $1.90 per diluted share, in the first three months of 2016. Investors expected more. The company had reported $58 billion of revenue and $13.6 billion, or $2.33 per diluted share, of net income in 2015’s first quarter.

The company’s share price peaked at $112.10 on April 14, then dropped as low as $93.64 Monday, a week after the news. Broader stock market indices dropped sharply Friday, and mortgage rates headed down, too.

Michelle Velez, producing branch manager at Supreme Lending in San Mateo, California, explains the typical pattern.

“When the stock market is worse,” she says, “people pull money out and put it into bonds. The yield goes up, the rate goes down.”

Parent-assisted mortgages

Low mortgage rates combined with rising home values have prompted some middle-age homeowners to cash out equity to help their Gen X and Millennial children purchase their own first homes.

Velez says her team has seven purchase-money mortgages in the loan process this week. Of those buyers, five have parent-assisted down payments, and of those, three involve parental equity cash-outs.

“The parents feel it’s a good time to buy and own a home,” Velez says.

That anecdotal evidence of parental support for homebuying is supported by research.

A new working paper by researchers at the University of Southern California in Los Angeles found parental-provided resources are “a substantial benefit to young homebuyers.” The connection was particularly strong if the parents were also homeowners and in the upper quartiles of wealth distribution and the children were old enough to have completed their college education.

“Children aged 25 to 44 who receive a transfer are more likely to become homeowners than children at those same ages who do not receive a parental transfer,” the study found.