U.S. mortgage rates tumble to 6.55% in biggest drop in two years | Business

The rate on a five-year adjustable mortgage plummeted 31 basis points to 5.91%, the lowest this year.

An index of refinancing jumped nearly 16% last week to a two-year high of 661.4. Mortgage applications to buy a home increased 0.8%, the first advance in a month. The overall index of applications, which includes the two, climbed 6.9% last week to the highest level since the start of the year.

Mortgage rates track U.S. government securities, and Treasury yields plunged at the end of last week after a dismal jobs report fueled expectations the Federal Reserve will pursue more aggressive cuts in borrowing costs.

The rally sparked debate that the central bank will opt for a 50-basis-point rate cut at its September meeting, but policymakers are likely to push back on such a move.

The average 30-year mortgage rate is down 0.74 percentage point from this year’s peak of 7.29% in April.

At the same time, still-rising home prices present a headwind for prospective buyers. A further pickup in listings may help limit price growth and reinvigorate sales of previously owned houses.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts.

The data covers more than 75% of all retail residential mortgage applications in the U.S.