Coronavirus impact on mortgage rates remains uncertain
“Will mortgage rates remain low?”
Probably, for the time being.
It’s a question many homeowners, and potential homebuyers, are asking. But with uncertainty rampant, thanks to turbulent financial markets and the spreading coronavirus, it’s hard to say for sure just how long they’ll stay rock bottom.
Last week, for instance, the average rate on a 30year, fixed-rate mortgage ticked up slightly to 3.36% from a record low – despite financial indicators that suggested it would fall.
“I was disappointed it went up,” said Lawrence Yun, chief economist for the National Association of Realtors.
Low rates can help people afford to buy homes because they mean lower monthly payments.
Mortgage rates generally track the yield on stalwart investments known as 10-year Treasury bonds. (“Yield” is financial lingo for the return an investor realizes on a bond.)
Investors consider Treasury bonds nearly risk-free because they are issued by the U.S. government. So investors pile into them as a haven in uncertain times – and boy, are the times cloudy. Investors spooked by the spreading virus and plummeting stock market funneled cash into Treasuries, which pushed down yields to record lows. Mortgage rates also dropped to a record low, to an average of 3.29% the week ending March 5.
Mortgage rates were expected to fall again last week too, in line with Treasury yields – but they didn’t. Freddie Mac, the mortgage finance giant that tracks home loan rates, said Thursday that the average rate instead rose to 3.36%.
Apparently, banks and mortgage brokers were so deluged by customers seeking to refinance their loans at the lower rates that they actually had to charge higher rates, to slow demand.
Still, mortgage rates remain at “extraordinary levels,” Sam Khater, Freddie Mac’s chief economist, said in a statement. A year ago, 30-year fixed rate mortgages were above 4%.
And the difference in a monthly payment at 3.36% and 3.29% would be only $4 on a $100,000 mortgage.
Rates will “likely stabilize but remain low for now,” said Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association.
That should help borrowers seeking to refinance or buy a home this spring.
If you can afford higher monthly payments, consider a 15-year mortgage. Average rates on those loans did fall last week, to 2.77%, from 2.79% a week earlier.
Many homeowners, and potential buyers, are wondering mortgage rates will remain low. But with uncertainty rampant, thanks to turbulent financial markets and the spreading coronavirus, it’s hard to say for sure just how long they’ll stay rock bottom.