The numbers: Mortgage rates are down for the first time in six weeks, as the U.S. economy deals with bank collapses and an uncertain road ahead.
The 30-year fixed-rate mortgage averaged 6.60% as of March 16, according to data released by Freddie Mac
That’s down 13 basis points from the previous week — one basis point is equal to one hundredth of a percentage point.
Last week, the 30-year was at 6.73%. Last year, the 30-year was averaging at 4.16%
The average rate on the 15-year mortgage fell to 5.9%, from 5.95% the previous week. The 15-year was at 3.39% a year ago.
Freddie Mac’s weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage.
Separate data by Mortgage News Daily said that the 30-year fixed-rate mortgage was averaging at 6.55% as of Thursday morning.
What Freddie Mac said: “Turbulence in the financial markets is putting significant downward pressure on rates, which should benefit borrowers in the short-term,” Sam Khater, chief economist at Freddie Mac, said in a statement.
Khater urged buyers to shop around for additional rate quotes and not stick with one lender, given the present volatility in mortgage rates.
“Our research concludes that homebuyers can potentially save $600 to $1,200 [per year] annually by taking the time to shop among multiple lenders,” Khater said.
What they’re saying: A drop in rates is boosting mortgage demand, Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement.
“Anticipated further rate declines may spur additional application gains as the spring home buying season begins,” he added.
Market reaction: The yield on the 10-year Treasury note
was trading below 3.5% during the afternoon trading session on Thursday.
Mortgage rates in the United States have experienced a dramatic reduction amid worries over bank closures and instability in the financial markets, according to figures released by finance giant Freddie Mac. In its weekly release, Freddie Mac reported that the average 30-year fixed-rate mortgage rate dropped from 3.6% to 3.49% on May 14th.
The reduction follows recent news about banks facing potential closures in the U.S due to ongoing economic distress caused by the pandemic. A number of smaller and regional banks have closed their doors in recent weeks, leading to a reduction in the availability of funds for mortgage rates. This has led to a fall in mortgage borrowing costs, making it easier and more affordable for buyers to enter the housing market.
At the same time, the volatility in the financial market has impacted the mortgage rate environment, creating a favorable environment for those looking to purchase homes. Significant changes in stock prices and the sharp drops in commodity prices have caused fears among investors, leading to a flight of capital to the relative safety of the bond markets. Investors have swapped out their stock market holdings for the safety of bonds, driving the prices of bonds to their highest levels in years. This, in turn, has pushed down mortgage rates as investors allocate their funds to such relatively safer investments.
It is believed that the current environment could create a wave of new homeownership. With low mortgage rates and the promise of financial relief from the government, the traditionally large spring buying season that began in March could be a boon for the housing market. However, it remains to be seen if the economy will continue to move in a favorable direction and if the mortgage rates will remain stable in the weeks and months ahead.
Overall, the mortgage market is seeing lower rates thanks to worries over bank closures and volatility in the financial markets. With so many unknowns present, it’s impossible to predict where the market will go from here, but the current mortgage situation is certainly offering a glimmer of hope in an otherwise troublesome economic time.