“With rates now at all-time historic lows, it’s hard to imagine that people may be holding out for something even better," Paul Buege, president and COO of Inlanta Mortgage in Pewaukee, Wis., said in an email.
The average for the 15-year fixed rate increased to 2.59 percent with an average 0.8 point. The rate was 2.58 percent a week ago and 3.16 percent a year ago. The average for the five-year adjustable rate fell to 3.08 percent with an average 0.5 point from a week ago. The rate was 3.09 percent a week ago and 3.39 percent a year ago.
Economic uncertainty over spiking cases of the novel coronavirus may keep mortgage rates down a while, according to some housing experts and loan officers watching the market. A contributing factor: Jittery investors tend to move their money from the stock market into the relative safety of 10-year Treasury note, which results in lower yields. Mortgage rates tend to follow the path of the 10-year Treasury note.
Still, “the number one driver of low mortgage rates is the accommodating Federal Reserve stance to keep interest rates low and to buy up mortgage-backed securities,” said Lawrence Yun, chief economist of the National Association of Realtors. “We will see mortgage rates stay near this level for the next 18 months because of the significance of the Fed’s stance.”
Although Yun said that mortgage rates may change slightly based on fears of increasing coronavirus cases or unemployment claims, those will be small moves compared to the massive influence of the Fed’s activities.
“There are so many variables going into mortgage rates right now that it’s hard to know what will tweak them up or down on any given day,” said Hope Morgan, branch manager with Mortgage Network in Salisbury, Md. “Reports on the continued spread of covid-19 and jobless claims and tariffs have an impact on the stock market, which has been so volatile and in turn impacts mortgage rates. In the early stages of the pandemic rates were changing four or five times a day. Now there’s less of a knee jerk reaction to every piece of news but it’s still hard to predict where rates will go.”
Lower rates continue to increase affordability for buyers and refinancing homeowners, Morgan said. For example, on a $300,000 loan, the monthly payment including principal, interest and estimated taxes and insurance would be $1,298 this week compared to $1,448 at this time last year.
“Mortgage rates might be even lower but there’s more risk to lenders with so much economic uncertainty,” Morgan said. “Lenders need to kind of float in the middle between low rates and pricing for risk.”
Meanwhile, the historically low rates didn’t seem to spur buyers last week. After a steady climb, mortgage applications fell from the previous week, according to the Mortgage Bankers Association. The market composite index, which measures the total volume of loan applications, dropped 8.7 percent. The purchase index slid 12 percent but was 21 percent higher than a year ago. The refinance index fell 12 percent but was 76 percent higher than a year ago.
"The nine-week streak of increasing purchase mortgage applications came to an end last week, but activity has increased year-over-year for five straight weeks. Record-low mortgage rates and households unaffected by the widespread unemployment in some job sectors are fueling the uptick in home buyer demand,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement. “Refinance activity also continues to outpace year-ago levels significantly, and with mortgage rates expected to remain very low, MBA is forecasting refinance volume to increase to $1.35 trillion in 2020 — the highest in eight years.”