Mortgage rates are falling fast, and they could sink even lower. Mortgage News Daily reported that the 30-year fixed-rate mortgage averaged 3.34% on Monday, a rate last reached in 2012 and briefly in 2016.
Long-term mortgage rates loosely follow the 10-year Treasury yield. Coronavirus fears are hitting financial markets and prompting bond yields to move lower; mortgage rates are following suit.
“When rates fall this quickly, it’s not so much that big banks draw the line on mortgage rates, but rather, the underlying mortgage backed securities market refuses to improve as quickly as the Treasury market,” Matthew Graham, chief operating officer at Mortgage News Daily, explained to CNBC. “Both mortgages and Treasuries are feeling the impact of coronavirus panic. That’s pushing rates lower. But mortgages also become less valuable to investors if they get paid off too quickly.”
Refinance applications surged 165% annually as homeowners rushed to lock in rates, the Mortgage Bankers Association reports.
Restrictive lending, however, may block some mortgage shoppers from taking advantage of the low rates. “Unless you have a large down payment or unless you have a very solid amount of free cash flow that’s underwritable, and we forget about this because the Uber driver might not have income that is fungible from a mortgage lender’s perspective, or the people working three or four jobs … they may literally have trouble qualifying for a mortgage,” Sean Dobson, CEO of Amherst Holdings, told CNBC.
Source: “Coronavirus Fears Cause Mortgage Rates to Plunge to 8-Year Low,” CNBC.com (Feb. 24, 2020)
