The average rate for a 30 year-fixed mortgage dropped below the previous record low of 3.13% that was occur June and marks the fifth new low since March. Last year, the rate was 3.75%.
The data suggests the recent rebound in economic activity has come to a halt throughout the last couple of weeks, with some declines in consumer spending and a pullback in purchase activity, based on Freddie Mac.
“Today’s report shows mortgage rates declined as investors reacted to the surge in Covid cases and the Federal Reserve’s concerned outlook for economic recovery,” said George Ratiu, senior economist at Realtor.com
Even with rates moving toward the 3% mark, lenders maintained tight underwriting standards which contributed to a decline in mortgage applications for the 2nd consecutive week, he said.
“Mortgage rates this low, coupled with current demographics favoring homeownership, would normally lead to strong sales activity,” he said. “However, getting approved for a loan is proving to be a difficult challenge for many, especially first-time homebuyers who struggle to come up with a 20% down payment.”
But the long term picture is murkier. Ratiu said areas are moving through a transition period.
“On one hand, buyers are clearly returning to the market, eager to take advantage of low interest rates while moving toward a new normal,” that he said. “On the other hand, the strong resurgence in Covid cases, especially in Sun Belt states, along with broader economic uncertainty during the current recession, is holding many sellers back from entering the market.”
This week mortgage applications dropped 1.8% from the week before, according to the Mortgage Bankers Association’s weekly application survey.
“Investors are contemplating the risks of the recent resurgence of Covid-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
“The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers’ options,” that he said.