Mortgage Rate Drops to Historic Lows!!
In the last week, mortgage rates have gotten even more affordable and have reached an all-time low. As stay-at-home orders are beginning to lift across the nation, this is music to the ears of many potential homebuyers who were already considering purchasing a home before the Coronavirus pandemic hit the US. Additionally, the drop in interest rates may even encourage more buyers to enter the housing market and invest. As states reopen, we anticipate purchase demand to improve quickly given that is essentially flat in relation to demand a year ago
As buyers begin securing financing again, home sales are expected to see a rebound from the declines experienced in March and April. For the third time this year, the mortgage market has recorded a new historical low for interest rates. Freddie Mac FMCC reported that the 30-year fixed-rate loan dropped to an average of 3.15% during the week ending May 28. This was a decrease of nine basis points from the previous week. This is the lowest level that fixed rates have been since Freddie Mac began tracking this data starting in 1971.
The previous record low for the mortgage market was set at the end of April when the average rate on a 30-year fixed-rate home loan dropped to the then historic low of 3.23%. For perspective, the 30-year fixed-rate mortgage averaged approximately 3.99% about a year ago.
Likewise, both the 15-year fixed-rate mortgage and the 5-year Treasury-indexed hybrid adjustable-rate mortgage dropped to an average of 2.62% and 3.13%, respectively.
For several weeks now, rates have remained consistently low by historical standards, which signals that the relationship between mortgage rates and bond yields has improved. Historically, before the COVID-19 pandemic, mortgage rates have paralleled the direction of the 10-year Treasury yield TMUBMUSD10Y, 0.694%. However, that relationship was disrupted due to the volatility in the mortgage market spearheaded by the COVID-19 pandemic and the subsequent wave of forbearance requests that followed.
Overall, lower mortgage rates are likely here to stay at least for the foreseeable future. Fannie Mae is projecting an average of 2.9% for every quarter of 2021. Additionally, the number of mortgage applications for loans to purchase new homes is anticipated to rise given the rates. Lastly, refinance volume remains 176% above the levels seen just a year ago, which by the end of the year, refinanced loans are expected to be at a 17-year high, according to the forecast.
Despite the foregoing, the purchase market may continue to see a drop-in home sales because of job layoffs and economic distress in many parts of the country. As such, buyers are well positioned to upgrade to their dream homes and make investor friendly purchases.
Schedule a call with me here if you have any interest in obtaining a complimentary valuation for your home or buyer consultation.
Authored by: Stanley Montfort
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