Driven down by worries about a trade war with China, mortgage rates have sunk to multiyear lows.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average tumbled to 3.6% with an average 0.6 point. (Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.) It was 3.75% a week ago and 4.59% a year ago. The 30-year fixed rate, which hasn't been this low since November 2016, has fallen nearly a full percentage point since the first of the year.

The 15-year fixed-rate average dropped to 3.05% with an average 0.5 point. It was 3.2% a week ago and 4.05% a year ago. The five-year adjustable rate average declined to 3.36% with an average 0.3 point. It was 3.46% a week ago and 3.90% a year ago.

"Mortgage rates fell to fresh multiyear lows this week as intensifying trade tensions rattled markets," said Matthew Speakman, a Zillow economist. "This week's escalation of the conflict greatly overshadowed a series of market-moving economic reports, including July's jobs data, typically the most-watched report each month, and pushed mortgage rates down sharply, as investors sought the safe haven of government bonds. With a light dose of economic data on deck for the coming week, the market's attention will likely remain on gauging the impact of the trade war on the global economy."

The yield on the 10-year Treasury sank to three-year lows this week as trade tensions with China escalated, global economic growth slowed and moves by central banks across the globe made investors anxious. It fell to 1.71% on Wednesday and hasn't been above 2% this month.

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Bond yields move in opposite directions of prices. When demand for bonds is high, prices rise and yields fall.

Long-term bonds tend to be the most reliable indicators of where mortgage rates are headed. However, home loan rates haven't declined as sharply as the 10-year yield.

"The big move down in Treasury yields has not yet translated into similarly lower mortgage rates," said Michael Becker, branch manager of Sierra Pacific Mortgage in White Marsh, Md. "Mortgage-backed securities have not rallied as much as Treasuries. This often happens when Treasury yields drop quickly."

Bankrate.com, which puts out a weekly mortgage rate trend index, found that half of the experts it surveyed say rates will move lower in the coming week. Becker is one of the experts predicting rates will continue to fall.

Weekly averages for popular mortgage types. Photo by: The Washington Post
Weekly averages for popular mortgage types. Photo by: The Washington Post

"Mortgage rates are the best they've been since November of 2016," he said. "If this move in Treasury yields holds, I would expect mortgage rates to start to catch up with the move in Treasury yields and we will see lower rates in the coming week."

Meanwhile, falling rates caused mortgage applications to pick up. According to the latest data from the Mortgage Bankers Association, the market composite index - a measure of total loan application volume - increased 5.3% from a week earlier. The refinance index jumped 12% from the previous week, while the purchase index fell 2%.

The refinance share of mortgage activity accounted for 53.9% of all applications.

"The lowest mortgage rates in well over two years led to a surge in refinancing, with activity up 12% last week and 116% from a year ago," said Bob Broeksmit, MBA president and CEO. "Purchase applications also continue to trend higher than year-ago levels, but activity has decreased in recent weeks. Concerns about the economic outlook and stock market volatility are likely causing some prospective buyers to delay their home search."

The MBA also released its mortgage credit availability index (MCAI) this week that showed credit availability decreased in July. The MCAI edged down 0.4% to 189 last month. A decrease in the MCAI indicates lending standards are tightening, while an increase signals they are loosening.

"Credit availability in July decreased overall, driven by declines in the conforming and government indices," Joel Kan, an MBA economist, said in a statement. "Conditions tightened some for borrowers with high loan-to-value ratios and lower credit scores. One outlier was the jumbo index, which increased to its highest level since the inception of this survey in 2012."

This article was written by Kathy Orton, a reporter for The Washington Post.