Mortgage rates have been looking good: How low will they go?
The big story
Mortgage rates have been remarkably low for quite a while now, and there are a few reasons as to why. Part of this has to with the notable recent volatility of tech stocks such as Apple and Amazon. Both had been viewed as “winners” of the pandemic, as their respective business models are not necessarily adversely affected by lockdowns or other such limitations.
There doesn’t seem to be any one thing that caused the change in sentiment, but it appears investors may be wary of the state of the economy in general. There’s also been some speculation in the market, which pushed some money back into bonds and away from stocks.
This bond market trend has kept mortgage rates low and supported the market for both new and existing home sales.
Second, the Federal Reserve has committed to a policy of keeping short-term interest rates low, likely until 2024. Essentially, inflation has been on the weak side, which doesn’t help the economy because people aren’t motivated to buy now. Short-term rates are correlated with the longer-term rates for things like mortgages.
Additionally, the Federal Reserve’s Federal Open Market Committee pledged to keep buying agency mortgage-backed securities. The more buyers there are in that market, the lower mortgage rates can be because the bonds underlying the loans don’t need to offer as high of a return to attract a buyer.
For you, this means it’s a good time to be in the real estate business. Take advantage of the opportunity to help as many clients as you can.
As mentioned above, mortgage rates are looking really good right now. I do want to make one special note because I know you’re constantly talking to clients past and present.
In December, the 0.5% refinance fee imposed by the FHFA on Fannie Mae and Freddie Mac to cover costs related to COVID-19 goes into effect.
Because lenders want to make sure turn times are accounted for, this is likely to show up on rate sheets again at the beginning of October. If you have a client who can get a better rate, but isn’t sure of the timing, now might be a good time to reevaluate.
The average rate on a 30-year fixed mortgage with 0.8 points paid in fees was 2.87%, up 1 basis point in the week of September 17. This had fallen from 3.73% a year ago.
The average rate on a 15-year fixed mortgage with 0.8 points paid was down 2 basis points to 2.35%. This represents a sizable drop from 3.21% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.3 points paid was down 15 basis points to 2.96%. This is down from 3.49% in mid-September last year.
Hopefully this has helped broaden the market knowledge you can share with your clients. For even more news, tips and tricks check out our real estate agent page.