The 15-year fixed-rate average remained at 2.32 percent, with an average 0.6 point. The five-year adjustable-rate average of 2.89 percent, with an average 0.3 point, was up from the 2.88 percent of the previous week. A year ago, the 15-year rate was 3.13 percent and the five-year was 3.39 percent.
“It’s not surprising that rates hit another record low this week,” said George Ratiu, senior economist with Realtor.com. “We’ve seen the stock market go massively up and massively down lately, even just this week, which means even more investors are moving to the bond market for safety and better returns.”
“Given the fact that election results are still up in the air and legal challenges are already in place, this uncertainty will likely be with us for weeks or longer and that’s not helpful in terms of stock market performance,” Ratiu added. “The housing market is the bright hope and distraction from the challenges of 2020, which means investors are drawn to mortgage-backed securities.”
Mortgage rates since March have fallen significantly, driven mainly by a Federal Reserve intervention designed to stabilize the housing market. The Fed has been attempting to bolster the market by purchasing mortgage-backed securities — bundled mortgages sold to investors. The Fed intends to stick with the policy until at least 2023, so mortgage rates should remain low for the long haul.
Freddie Mac’s averages are derived from its Primary Mortgage Market Survey — a query that goes out every week to 80 lenders nationwide to capture the rates they’re offering buyers. The survey only includes borrowers seeking conventional mortgages making a 20 percent down payment with excellent credit.
The stock market, the yield on 10-year Treasury notes, and a variety of political and economic issues are other factors mortgage bond investors take into account when setting rates.
Some experts say rates would be even lower if the lending community was better equipped to deal with the crush of applications they are spurring.
“With rates at historic lows, mortgage lenders are raising rates and margins in order to slow down application volumes because they simply cannot fulfill the loans with the staffing and infrastructure they currently have in place. This supply-demand dynamic currently has a large impact on rates offered to consumers," Jim Cameron, senior partner with the Stratmor Group in Greenwood Village, Colo., said in an email.
“For example, mortgage rates are typically 1.8 percent higher than the rate on 10-year Treasuries," Cameron added. "But today, the spread is in the 2.25-2.5 percent range. Also, labor costs are skyrocketing as lenders bid for operations staff such as underwriters, and extra margin is needed to cover those costs.”
While low mortgage rates are helpful, Ratiu said, median sales prices are rising so rapidly that the actual savings for buyers is limited. When comparing the monthly payments on the median priced home at this time last year ($311,000 at 3.69 percent for a 30-year fixed-rate loan) to the median priced home of $350,000 now at 2.78 percent, Ratiu said buyers will pay only about $8 less per month.
Still, Sam Khater, Freddie Mac’s chief economist, said the low rates are good news for consumers.
“Mortgage rates hit another record low, the twelfth time this year, due to economic and political ambiguity,” Khater said in a statement. “Despite the uncertainty that we’ve all experienced this year, the housing market, buoyed by low rates, continues to be a bright spot.”
Meanwhile, the overall number of people seeking mortgages rose again last week, according to the Mortgage Bankers Association.
The market composite index, which comprises both application types, increased 3.8 percent last week. The purchase index fell 3 percent from last week but soared 25 percent from a year ago. The refinance index increased 6 percent from a week earlier and jumped 88 percent from a year earlier.
“Despite the ongoing pandemic and economic uncertainty, purchase applications have now increased on an annual basis for six consecutive months,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement. “With rates remaining near record lows, the refinance market remains strong. Activity increased 6 percent last week and was up an impressive 88 percent compared to last year.”
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