As the prices for homes climb, bigger down payments needed
Record low mortgage rates a sign of economic trouble
Mortgage rates fell to a record low for the 12th time this year, according to government-sponsored mortgage-finance company Freddie Mac, as the nail-biting election and signs of a COVID resurgence cast the future into doubt.
The average rate for a 30-year fixedrate mortgage fell to 2.78 percent last week, down from 2.81 percent the week before and 3.69 percent a year ago. The average rate for a 15-year fixed-rate mortgage was 2.32 percent.
While lowrates are good for homeowners, they’re a sign of a troubled economy. When investors become nervous, they seek safer investments and pour money into government bonds and mortgage debt — much of it backed by
Freddie Mac and its sister company, Fannie Mae.
Investors are so hungry for security that they are willing to accept lower yields, driving down the interest paid on bonds and mortgages.
Actions by the Federal Reserve to support the economy, including cutting short- term rates to near zero and buying government- and mortgagebacked bonds, are also driving down mortgage rates.
George Ratiu, senior economist for the real estate listing site Realtor.com, pointed to uncertain election results, high unemployment claims and low returns due to the Federal Reserve’s quantitative easing for driving investors to buy mortgage- backed securities.
He also pointed out that while mortgage rates are have fallen dramatically this year, home prices have risen somuch that a prospective homebuyers may not be seeing much of a savings.
“For buyers looking to purchase the median- priced home this month, the monthly mortgage payment will be just $ 8 less than it would have been last year, for a total savings of about $ 99 per year,” Ratiu said. “The steep price gains are placing affordability front- and- center.”