Coro­n­avirus im­pact on mort­gage rates re­mains un­cer­tain

The Kansas City Star - - News - BY ANN CARRNS New York Times

“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.

TILL LAUER NYT

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.

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