For the first time in the last 50 years, the mortgage rates for the 30-year fixed-rate loan have come below 3%. Freddie Mac reveals that the rates sat at 2.98% for the week closing on July 16. On the year-to-year chart, it is a 22% decline.
Unsurprisingly, the rate drop has raised the demand for homes and the meager rates have been “capitalized into asset prices in support of the financial markets,” divulges Freddie Mac’s chief economist, Sam Khater. Things might still get tight though, thinks Khater, if the reemergence of Covid-19 cases hurts the economic recovery, turning “temporary layoffs at risk of ossifying into permanent job losses.”
The 15-year fixed-rate mortgage averaged 2.51% for the week ending July 9. This average is down to 2.48% this week. For perspective, the same rate averaged 3.23% a year ago.
Virtual database company, Zillow, believes that while we have made progress from the stagnancy witnessed in the early spring, we are still a lot below levels reached before the pandemic hit us.
Matthew Speakman, Economist from Zillow, suggested in a statement that “What markets don’t know is whether this latest surge in COVID-19 cases is going to send the economy careening back downward, or if any positive developments regarding the pandemic exist on the horizon. Both of these factors will impact mortgage rates going forward, with the latter likely having a larger impact”.
To paraphrase Speakman, rates are expected to remain where they are unless there is some significant news. While short-term economic pessimism and Federal Reserve’s current tactics can keep rates this low, a breakthrough in vaccine search or line of treatment can spike rates again.