As you might imagine, the coronavirus has made much of modern society unstable, resulting in falling mortgage rates. Read on to see how mortgages will change after COVID-19…
After hitting an all-time low of 3.31% in 2012, 30-year fixed-rate mortgages slowly began to climb. Until coronavirus, that is. Now, eight years later, 30-year mortgage rates have dropped to just .29% according to Freddie Mac, and it likely won’t grow any time soon. Meanwhile, 15-year and 5/1 adjustable-rate mortgage rates did not fare well either – they each dropped down to 2.79% and 3.18%, respectively. So, while those with adjustable-rate mortgages are looking at a lower bill in the coming months, those who recently signed 30-year deals are likely kicking themselves for not waiting a little longer.
However, much is still unknown about how the coronavirus will affect mortgages. “Much remains unknown with this virus and its potential impact on human life and economic activity,” said Zillow economist Matthew Speakman. “COVID-19 is here, and it will continue to be the main driver of mortgage rate movements in the coming weeks.” So, some lenders are electing not to drop their rates yet. Not only are they worried about losing money, but they are also not seeing a decline in application rates. “Mortgage applications increased 10% last week from one year ago and show no signs of slowing down,” Sam Khater, chief economist at Freddie Mac, said.
Lacking Homes To Buy
So should you apply now or wait longer? Economists say don’t wait and apply! While they could drop lower, mortgage rates also have a chance of growing as some lenders struggle to process applications and need to hire more workers. “They don’t know how persistent these rates will be,” commented Tendayi Kapfidze, chief economist at LendingTree.
Meanwhile, there’s another significant issue: there might be fewer homes on the market than many think. “In order to take advantage of low mortgage rates, buyers will need homes to buy,” said Danielle Hale, chief economist at Realtor.com. While the pre-coronavirus demand remains, few construction crews are building new homes right now. At the same time, the available homes are quickly being snatched up, as pandemics can make life changes come about sooner. “These sorts of decisions tend to be shaped by factors more reflective of major events in individuals’ lives such as decisions to retire, have children, down-size, etc.,” said Mark Hamrick, a senior economic analyst at Bankrate. “It is a lot different than opting to pick up a pack of chewing gum at the last minute at the checkout counter of the grocery store.”
However, other economists aren’t so sure the demand will remain high. “That process can be fraught with nervousness under the best of times. If we see a significant weakening in the broader economy, including the weakening of the job market, it is hard to envision a scenario where the housing market can remain above that fray,” Hale said.
If you are thinking of picking up a mortgage, it is a great time, but be sure to talk with a financial advisor first!