US Mortgage Rates Have Hit A New Low As Coronavirus Fears Persist
Throughout 2020, home loan rates have continuously been dropping. According to Mortgage News Daily, rates have now dropped even lower than 3.00%.
With the second wave of Coronavirus looking increasingly likely, financial markets will continue to suffer from interest rates dropping to record lows.
Are you managing your mortgage during the coronavirus crisis to the best of your ability? Read on to learn more about how loan rates are evolving and how you can use this development to your advantage.
Plunging Mortgage Rates
A stock market sell-off in June sparked a cascade lower in loan rates while pushing investors to move into safer asset classes. Once the corresponding Treasury bond yield drop occurred, mortgage rates were quick to follow.
Within a day, rates for a fixed 30-year mortgage fell from 3.03% to 2.94%, according to lender surveys.
As a result, lenders were well-positioned to offer rates at or under 3.00%.
With millions of people now out of work, unemployment rates have skyrocketed in America.
The Federal Reserve predicts even further economic turmoil, which means that the stock market could take an even bigger hit despite its most recent recovery.
Now especially, a big surge in COVID-19 cases has been witnessed due to states reopening. This spike has caused some areas to return to a form of lockdown.
As long as the virus is still prevalent in many areas, sustaining any form of economic recovery will be a struggle.
Even though unemployment spiked to 13.30% in May, it’s predicted to still remain elevated above 9.00% until 2021.
However, for those that have held onto jobs, low-interest rates have fueled higher homebuying demand.
The COVID-19 impact on installment loans is prevalent and ongoing, which is why now is the time to do your research and act accordingly if seeking a mortgage or refinancing.
How Low Can They Go?
Will mortgage rates continue to drop? Whether rates will rise or fall will be largely dependent on Treasury bond rates.
In recent months, the interest on mortgages has dropped due to the Federal Reserve’s reduction of benchmark interest rates to just above 0.00%.
Its policy of purchasing mortgage-backed securities to try and assist the economy is also what has contributed to this great drop in mortgage and https://bestinstallmentloans.com/online-mortgage.htmlonline mortgage rates.
These loans are bundled together into packages and sold off to investors, very similar to bonds.
The Federal Reserve’s policy has raised security prices and simultaneously lowered investor yields, which has had a knock-on effect of triggering a mortgage interest rate drop.
Federal policymakers have indicated that they intend to leave interest rates close to 0.00% for 30 months and continue to buy mortgage-backed securities.
Rates will likely be kept low for the foreseeable future as an attempt to help stimulate a struggling economy.
Given the impact of COVID-19 shows few signs of abating, this will increase the possibility of further rate drops, which is good news for borrowers and prospective homebuyers.
Refinancing As An Alternative
Even prior to falling under 3.00%, low rates had the effect of creating a rush amongst property owners to refinance homes.
This happened given many financial experts recommend refinancing homes if the option is there for them to do so and the accumulated savings outweigh the costs.
The possibility of rates going down further may persuade many borrowers to wait, but with rates already hovering at such low levels, now could be the perfect time to act.
A homeowner on a 30-year mortgage, with a credit score better than 720 with a minimum of 20.00% equity in their home is an optimal candidate for refinancing.
This homeowner could see up to a 1.00% decrease or more in loan interests by sourcing a new deal according to Black Knight.
Moreover, a recent survey conducted by Freddie Mac suggests that 14 million Americans should refinance given they could save $282 per month on average on their payments.
Nevertheless, finding a sub-3.00% rate may still take some effort, as rates tend to vary significantly amongst lenders.
Borrowers may see rate offers vary by up to 1.00%, so it’s important that those considering refinancing do their research, compare rates between lenders, and source the lowest rate possible.
For borrowers considering refinancing, online comparison sites are a good starting point to evaluate what is available.
Bottom Line
One of the many effects of COVID-19 has been a steady mortgage interest rate drop, with rate tumbling below 3.00% in June.
Financial experts suggest that rates may drop even further, but the decline has undeniably spurred an opportune time for many homeowners to consider refinancing deals or prospective buyers to pull the trigger for a great deal.
