by Martin Santiago, broker-partner
THE 30-year average fixed mortgage rate fell to 2.81% from 2.87% last week, Freddie Mac said in a statement Thursday. The reading is the lowest of data in nearly 50 years.
The latest record low was 2.86% in early September. The string of new lows in mortgage rates are unlikely to end anytime soon. The Federal Reserve said in September that its benchmark interest rate would likely stay close to zero until 2024, in turn limiting a rise in mortgage rates.
New home sales have picked up, to such an extent that there are only 3.3 months of supply left if the pace continues. This is the shortest period in data going back to 1963, according to the Census Bureau. Sales of existing homes followed the same trend. While the housing market presents a bright spot in the struggling US economy, the shortage of supply has pushed up prices and may soon force some to delay homeownership. Cheap loans have fueled a housing recovery that has supported the pandemic economy, even amid persistent job losses. Purchases have skyrocketed and millions of current homeowners have been able to save money by refinancing. But growing demand for the scarce supply of properties on the market is pushing up prices, putting home ownership out of reach for many Americans.
And lenders have tightened credit standards, presenting another potential hurdle for potential buyers.
Factors behind today’s mortgage rates: strength of the economy, inflation rate, employment, consumer spending, housing construction and other market conditions, stock and bond markets, Treasury yields to 10 years, Federal Reserve policies. Personal economic factors: credit score, credit history, down payment amount, loan-to-value ratio, loan amount, type and term, debt-to-income ratio, location of property.
Where are mortgage rates going? In the coming week (October 15-21), 53% of Bankrate panel experts predict rates will stay the same, while 7% expect rates to hike and 40% believe rates will drop. . In the coming weeks, new developments could arise, creating some volatility in the market. For now, my feeling is that for the most part rates will stay the same, although we may see a slight movement both up and down.
Best time to get a new mortgage or refinance? Rates are near an all-time low and are expected to stay that way for many months to come. This means that more and more homeowners can refinance to reduce their monthly mortgage payments. However, there are costs associated with refinancing that you must offset if you want to take advantage of a refi.
Giant borrowers – those who take on large loans that don’t fall under credit giants Fannie Mae and Freddie Mac – will find they have to cast a wide net to find a mortgage, and they’ll pay a higher interest rate. Some lenders, fearing the risk during the coronavirus recession, have left this market. Withdrawal refinancing is also declining, as lenders fear that people will lose their jobs and be unable to pay.
In an unexpected trend, this recession triggered a surprisingly strong housing market.
House prices have risen sharply in most parts of the country and bidding wars have broken out in many places.
As for rates, they should largely remain low in the coming months. Market watchers are waiting for the spread between Treasury yields and mortgage rates to narrow, a move that would put further downward pressure on rates. But with the Federal Reserve’s commitment to buying almost limitlessly in the mortgage-backed securities market, anyone with good-to-excellent credit who wants a mortgage should be able to get a historically low rate, and even borrowers. having low to bad credit will also benefit. with a lower rate than before the Fed’s intervention.
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Martin Santiago is an Associate Broker at Compass Beverly Hills, a full-service residential brokerage firm. The information presented in this article is for general information only and is not intended to be formal legal advice or the formation of a broker-client relationship. Call or email Martin at (213) 788-8300 and [email protected]