March 12th, 2020 8:54 AM by Jackie A. Graves
One of the few bright spots in the coronavirus/stock market
panic is that mortgage interest rates have fallen to their lowest levels in
nearly 50 years, lower than during the Great Recession. That's quite a windfall
for home buyers, as well as for homeowners hoping to cut down on their monthly
loan payments. And yet, some are wondering whether rates could go even lower.
After all, who wants to leave money on the table?
estate experts are divided on whether rates will continue to decline. Some
believe they'll dip into the low-to-middle 2% range. Others say rates have
already bottomed out. And some believe we're in such uncertain times—with a
potential recession looming—that there's no telling in which direction rates
will head next.
in uncharted territory, so you can’t look to history as a guide to what could
happen. It's hard to predict how mortgage rates will react," says
realtor.com's chief economist, Danielle Hale.
"I don't think they'll go up until it's pretty clear we're out of the
woods. They might move sideways, or they might go down more slowly."
The average 30-year fixed-rate loan was just 3.29% as of
Thursday, according to Freddie Mac. This is the lowest it's been since Freddie
Mac began tracking mortgage interest rates in 1971.
much can these lower mortgage rates save buyers and refi seekers?
Even a small change can add up quickly. Folks can save about
$159 a month this year compared with last on a 30-year fixed-rate loan for a
$300,000 home on which they put 20% down. That's because this time last year,
rates were at 4.45%. That's more than a full percentage point higher than this
year. And this year's rate can save buyers or homeowners refinancing more than
$57,000 over the life of their 30-year mortgage.
If the Federal Reserve cuts interest rates again, to stave off
an economic downturn, rates could go down again.
Hale estimates we’re about a third of a percentage point away
from hitting mortgage rates in the 2% range.
"For context, in the last six weeks, mortgage rates have
come down by that same amount," she says. But, "I don't think they'll
keep moving down quite as quickly."
Mortgage applications shot up 54.4% from the previous week and
192.4% compared with a year earlier in the week ending March 6, according to
the most recent data from the Mortgage Bankers Association. Refinances made up
the bulk of the applications, at 76.5%, up from 66.2% in the prior week and
479.2% from a year ago.
is stiff to secure mortgages, particularly refinances
To handle the rush of buyers and homeowners seeking money-saving
refinances, some lenders are raising rates.
“The obstacle now is, lenders are so backlogged, many of them
are not putting out competitive rates because they’re not looking to acquire
additional applications," says Greg McBride, chief financial
analyst at Bankrate.com, a personal finance website. "The mortgage
industry was not staffed for this type of influx of applications.
"The real challenge is, can you get your rate locked and
the loan closed before that lock expires, given that backlog?" asks
Mortgage lender Don Frommeyer has seen rates
tick up slightly to slow down the influx of folks seeking to refinance. His
company has hired four new underwriters to assess loans just in the past week,
nearly doubling the company's number of underwriters.
He believes rates will continue to fall into the low-to-middle
2% range, potentially by November during the run-up to the presidential
election. President Donald Trump will likely want to keep the
Federal Reserve's short-term interest rates low to stimulate the economy—and
mortgage rates are influenced by what happens to federal rates.
(Mortgage rates are related to the 10-year U.S. Treasury bond
market. When the stock market is volatile, as it has been recently, investors
often sink their money into bonds. And when bonds rise, mortgage rates fall.)
folks hold out for even lower mortgage rates?
Folks shouldn't wait for rates to fall further to lock in a
mortgage rate or refinance, warns Sylvia Gutierrez, a mortgage
banker at Impac Mortgage based in Miami. She believes rates will rise again
once the coronavirus panic is over.
"It’s not worth the risk to wait to see if they’re going to
go any lower. Jump," says Gutierrez, the author of "Mortgage Matters:
Demystifying the Loan Approval Maze.”
She adds, "I've been in the mortgage business since 1993
and I've never seen them this low."
Gutierrez practices what she preaches. She recently refinanced
her mortgage, cutting 12 years off the term of her loan without raising
her monthly payments. Her rate was 3.875% on a 30-year loan when she bought her
home in December 2018. She refinanced into a 15-year loan with a 2.5% rate.
But she advises folks to act quickly, as many lenders are
overwhelmed by the surge in business.
In addition, keep in mind that rising home prices could offset a
little of the mortgage savings for buyers. Prices are already rising at a
faster clip. In December, annual list prices were up 3%, according to
realtor.com data. They increased 3.4% in January and 3.9% in February.
Still, there's no question the lower mortgage rates are a boon
to anyone planning to purchase or refinance a home.
“Whether you get a mortgage that starts with a 2 or starts with
a 3, 2020 will be a good year for home buyers," says Bankrate.com's
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