Just how long mortgage rates will remain at rock-bottom percentages is tough to judge, but don’t be surprised if they do what they did last week and rise again over the next few weeks.
Despite the effects of the coronavirus on already turbulent financial markets and concerns of a recession, mortgage rates will “likely stabilize but remain low for now,” predicts Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association.
Last week, the 30-year fixed-rate mortgage rose to 3.36%, after a record low average of 3.29% during the week ending March 5, Freddie Mac reported.
“I was disappointed it went up,” Lawrence Yun, chief economist for the National Association of REALTORS®, told The New York Times. The lower rates can help homeowners lower their monthly payments at a time when some may be out of work due to the outbreak, he continued.
Mortgage rates typically follow those of 10-year Treasury bonds, which have been pushed to record lows over recent weeks. Yet, mortgage rates didn’t follow suit last week.
Could lenders be facing a capacity issue that is preventing rates from going lower? Mortgage brokers reported a slew of customers flocking to refinance their loans after rates sank to record lows. Some lenders said they actually ended up having to charge higher rates just to slow demand.
Nevertheless, mortgage rates remain at “extraordinary levels,” Sam Khater, Freddie Mac’s chief economist, said last week in a statement. A year ago, 30-year rates averaged 4.31%.
The Fed announced in an emergency meeting on Sunday that it would buy up at least $500 billion in U.S. Treasury bonds and $200 billion in government mortgage-backed securities over the coming months. Economists predict this will help support the surge in refinancing and stabilize mortgage-backed securities, which could help mortgage rates then move lower.
That would stabilize rates and bring them back down lower,” says Danielle Hale, realtor.com®’s chief economist. “They’ll [likely] go back to the low 3% [range]. Might we see rates below 3%? I wouldn’t rule it out.”
Ali Wolf, chief economist at Meyers Research, a national real estate consulting firm, expects rates to fall into the 3.1% to 3.2% range within the next few weeks, but stay within or under the mid-3% range through the rest of the year,
“Today’s low mortgage rates are equivalent, in some cases, to $30,000 off the price of a home” in some of the country’s priciest markets, Wolf told realtor.com®. “Mortgage rates are turning back time on affordability.”