by Martin Santiago, Broker-Associate
THE average 30-year fixed mortgage rate fell to 2.81% from 2.87% last week, Freddie Mac said in a Thursday release. The reading is the lowest in data going back nearly 50 years.
The last record low was 2.86% seen in early September. The streak of new mortgage-rate lows is unlikely to stop anytime soon. The Federal Reserve indicated in September that its benchmark interest rate will likely remain near zero through 2024, in turn limiting a climb in home loan rates.
Sales of new homes have rallied, so much so that just 3.3 months of supply is left should the pace hold steady. That’s the shortest period in data going back to 1963, according to the Census Bureau. Existing home sales have trended similarly. Though the housing market presents a bright spot in the struggling US economy, the supply shortage has lifted prices and may soon force some to delay homeownership. Cheap loans have been fueling a housing rally that has bolstered the pandemic economy, even amid persistent job losses. Purchases have soared and millions of current homeowners have been able to save money by refinancing. But surging demand for the scarce supply of properties on the market is pushing up prices, putting homeownership out of reach for many Americans.
And lenders have tightened credit standards, presenting another potential obstacle for would-be buyers.
The factors behind today’s mortgage rates: strength of the economy, Inflation rates, employment, consumer spending, housing construction and other market conditions, stock and bond markets, 10-year treasury yields, federal reserve policies. Personal economic factors: credit score, credit history, down payment size, loan-to-value ratio, loan size, type, and term, debt-to-income ratio, location of the property.
Where mortgage rates are headed? In the week ahead (Oct. 15-21), 53 percent of the experts on Bankrate’s panel predict rates will remain the same, while 7 percent expect rates to rise and 40 percent think rates will fall. In the coming weeks there could be new developments which create some volatility in the market. For now, my feeling is that for the most part rates will remain the same, although we may see some slight movement both up and down.
Ideal time to get a new mortgage or refinance? Rates are near a record low and are expected to stay this way for many months to come. That means more and more homeowners can refinance to cut their monthly mortgage payments. However, refinancing comes with costs that you must make up if you are to profit from a refi.
Jumbo borrowers — those taking large loans that fall outside the purview of lending giants Fannie Mae and Freddie Mac — will find they must cast a wide net to find a mortgage, and they will pay a higher interest rate. Some lenders, fearful of risk during the coronavirus recession, have left this market. Refinancing with cash out is shrinking, too, as lenders are worried people will lose their jobs and be unable to pay.
In one unexpected trend, this recession has sparked a surprisingly strong housing market.
Home prices have risen sharply in most parts of the country, and bidding wars have broken out in many places.
As for rates, they’re widely expected to stay low in the coming months. Market watchers are waiting for the spread between Treasury yields and mortgage rates to narrow, a development that would create additional downward pressure on rates. But with the Federal Reserve’s commitment to nearly unlimited buying in the mortgage-backed securities market, anyone with good to excellent credit who wants a mortgage should be able to snag a historically low rate, and even borrowers with poor to bad credit will benefit as well with a lower rate than before the Fed intervention.
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Martin Santiago is a broker associate at Compass Beverly Hills, a full service residential brokerage firm. The information presented in this article is for general information only and is not, nor intended to be a formal legal advice nor the formation of a broker-client relationship. Call or email Martin at (213)788-8300 & [email protected]