Interest rates for mortgages are declining. And in the foreseeable future, the trend may still follow. This could give millions of homeowners a chance to save some money. However, it also could also indicate that investors are still anxious with the economy with a pandemic background.
“We expect rates to stay low and continue to propel the purchase market forward,” Sam Khater, chief economist for Freddie Mac, had previously explained. Mortgage rates were sliding, making new record lows again and again. “However, the main barrier to rising demand remains the lack of inventory, especially for entry-level homes.”
More new mortgages
Applications for new mortgages just increased by 2 percent from a week ago, according to an article from CNBC. Comparing it to the same week from 2019, the difference is even 22 percent higher. Last week’s increase was even higher, with 6.8 percent climb from the preceding week, per the Mortgage Bankers Association’s seasonally adjusted index.
“While this was still positive news for the purchase market, the gradual slowdown in the improvement in the job market and tight housing inventory remain a concern for the coming months, even as low mortgage rates continue to provide support,” Joel Kan noted. He is an MBA economist.
Most interest rates saw a steep decline when the coronavirus was first emerging in the countries, except for mortgage rates. Normally, spread between 30-year fixed-rate mortgages and the yield on 10-year treasury bonds fall between 1.5 to 2.0 percentage points. But with the pandemic, points climbed, peaking in April at 2.71 percentage points. Mortgage rates dived, to the delight of borrowers.
The average contract interest rate dropped by over 3.06 percent from 3.14 percent for 30-year fixed-rate mortgages whose conforming loan balances amount to $510,400 or less.
Kan also explained: “Mortgage rates fell across the board last week, as investors grew less optimistic of the economic rebound given the resurgence of virus cases. Loan types such as the 30-year fixed, 15-year fixed, and jumbo all reached survey lows.”
Meanwhile, applying for refinancing a home loan rose by 9 percent this week, and is still up by 47 percent from 2019’s same period. Though there is still an increase when compared to last year’s, the gap is narrowing as weeks go by.