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Chinese currency devaluation depresses mortgage rates

Posted on Thursday, August 13, 2015 at 10:07:18 AM

Mortgage rates dropped for the third time in four weeks according to an Aug. 12 survey, in part due to the devaluation of the Chinese yuan - a shakeup that could lead to a delay in higher interest rates here in the U.S. 

A weekly Bankrate survey found that the average benchmark 30-year fixed-rate mortgage dropped to 4.04 percent from 4.1 percent, another in a series of declines over the past month, according to a press release. The 30-year fixed-rate mortgage has an average of 0.24 discount and origination points. The larger 30-year fixed rate followed a similar course through the week, dropping to 4 percent, the lowest it has been since April. 

The average 15-year fixed-rate mortgage rate also ticked down to 3.26 percent from 3.28 percent. In addition, five-year and seven-year adjustable mortgage rates dropped as well, to 3.2 percent and 3.29 percent, respectively. 

This week, the continued decline of mortgage rates was driven by the devaluation of the Chinese currency. This makes Chinese imports slightly more affordable and exports a little more expensive. While this doesn't affect the U.S. in a direct and drastic way, it could slow global economic growth through a larger trade deficit and downward influence on inflation.

This may lead the Federal Reserve to reconsider hiking up interest rates anytime soon, which in turn could make residential financing affordable for a bit longer than previously thought.