The housing sector is going through a major upheaval while interest rates hit all-time lows because of the coronavirus, but that won’t necessarily translate to lower mortgage rates on some mortgage programs. WHY?
The 30-year fixed-rate conventional conforming mortgage averaged 3.31% during the week ending April 16.
Theoretically, mortgage rates could be even lower if these were normal circumstances. Under normal circumstances, the high volume of money currently parked in the bond market would have likely led to a drop in interest rates to at least 2½%.
Historically, mortgage rates have roughly tracked the direction of the yield on the 10-year Treasury note which dipped below 0.7% in recent days. But investors and lenders have grown concerned about borrowers’ ability to repay loans.
That has limited interest in mortgage-backed securities, which in turn has limited lenders’ ability to lower rates much further than they already have. And with a growing number of Americans losing their jobs or being furloughed as a result of the coronavirus pandemic, lenders are growing stingier in terms of who they will give a mortgage to.
As a result, lenders have increase loan pricing to most mortgage programs to account for the added risk they’re facing right now. Most banks have also imposed more stringent underwriting standards for new home loans, including higher credit scores and down payment requirements.
And borrowers who are looking for loans beyond the standard conventional conforming loan limits (only rate and term refinance and purchases) such as High Balance conforming, FHA, VA and jumbo mortgages, may face greater difficulty in getting them as the pricing and rates for these have little or no value to refinance now.
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About the Author
Ryan Christensen
Responsive, Responsible and Resourceful - How Real Estate Should Be. This is the foundation of our continued success: responsive service, providing accurate and timely information, and demystifying the process. 100% of my business is referral based because I listen to my clients' needs and exceed their expectations. As a full-time real estate broker, I am the best advocate for both my buyers and sellers. I am always available, regardless of the time of day.
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