It is no secret that the COVID-19 pandemic has sent the U.S. economy through a major loop. With businesses closed and restricted and the major uncertainty of the moment, the economy has not fared well. In the midst of the economic downturn, mortgage interest rates have dropped to historic lows. Here’s why.
Mortgage Rates Fall to New Lows During COVID-19 Pandemic
As of May 21st, Freddie Mac reported that the average for a 30-year fixed-rate mortgage came out to be 3.24%. For a 15-year fixed-rate mortgage, the average was at 2.7%. These are very low rates. Rates have been low in large part due to the efforts of the Federal Reserve. The central bank has taken steps to keep interest rates in order to help try and boost the U.S. economy back from its Coronavirus slump.
While the Federal Reserve has stated that it does not know how effective it will be at helping the economy bounce back should public health concerns over COVID-19 persist for an extended period of time, mortgage rates have become, for now, stabilized at low levels. To stabilize mortgage rates at these lower rates, the Federal Reserve essentially put money into the mortgage finance system. This was accomplished, in part, through purchasing billions in mortgage-backed securities.
The drop in mortgage rates is interesting in that it presents a break in mortgage rates trending in the direction of long-term bond yields. While the stock market has taken some major hits during this difficult economic time, even when it has shown improvements, mortgage rates have remained low. Historically, a boost in the stock market would result in an upward movement in mortgage rates.
Another interesting thing to note is that, while mortgage rates have reached record lows, the pandemic is making the housing market very difficult for buyers as homes are becoming less affordable. After stay-at-home orders were eased across the country, buyers came back into the housing market. Sellers, however, did not. This means there is a flood of buyers in the market with minimal inventory in the way of available houses. Due to the supply-demand ratio being so skewed, houses have skyrocketed in selling price. This means that, while buyers may be able to secure low mortgage rates, they may be hard-pressed to find a house they can actually afford to buy.
Real Estate Attorney
This is a very interesting time in real estate. If you have any questions about the housing market or mortgages, the dedicated real estate attorneys at Merlino & Gonzalez are here to help in any way we can. This includes helping homeowners who are looking to sell or who may be interested in taking advantage of low mortgage interest rates and refinancing their mortgage, and it also includes those looking to buy in the current market. We can help answer your questions and provide you with sound legal counsel on real estate matters. Contact us today.