For the past couple years, mortgage rates have been decreasing dramatically. In correlation, the stock market has also taken a plunge in recent years. A variety of experts have weighed in on the low mortgage rates and stock market troubles; though all say the two are related, all expect low interest rates for mortgages to continue.
Whenever the stock market dips, panic ensues. People expect mortgage rates to increase, jobs to be less available and portfolios to be damaged. Though the latter two may hold true, mortgage rates are much more complicated.
Diana Olick of CNBC has been covering this trend extensively. Olick has demonstrated that not only are mortgage rates uncommonly low, but they are going to remain so for some time. Olick says, “Mortgage finance reform is basically on the back-burner until we get a new president and a new Congress. As long as the Fed is the mortgage market’s sugar daddy, rates won’t move much higher.”
In other words, Olick claims the Federal Reserve relies on the dependability of mortgage-backed securities. These are essentially safer options for investors and are more sought after. In addition, the overall dependency of the Fed on a healthy mortgage market is in their best interest.
Reporting for 24/7 Wall St., Paul Ausick further elaborated on Olick’s observation. Ausick claims, “Stock weakness was big enough that investors sought safer havens, which typically include the US bond market. As money comes into the bond market, investors are willing to pay more for debt, such as the kind that’s created by pools of mortgages. Lenders are then able to offer lower mortgage rates.”
Also reporting similar findings is Matt Caron of wwlp.com for News 22 out of Mass. “Mortgage rates track government bonds and the interest on those bonds remain low because more people are buying them; more specifically, investors who are worried about the global economy and China and have turned to the U.S. for stability.” According to Caron, economic portfolio ‘turbulence’ has resulted in the low interest rates for mortgages.
Considering the reliability of the US Bond Market, interest rates will likely remain low for mortgages. More reports about lower-than-normal mortgage rates are likely to appear.
In fact, the Associated Press out of Washington said, “Mortgage buyer Freddie Mac says the average 30-year fixed-rate mortgage declined to 2.99 percent from 3.125 percent last week. It’s far below its level a year ago of 3.80 percent.” This was reported on June 23rd, 2020. Even the most recent reports are suggesting lower interest rates, a trend that has been reported on for over a year now.
Despite lower mortgage rates, people are not becoming more inclined to take advantage of the market. Here is the title of one of Diana Olick’s more recent articles: “Mortgage applications up just 0.4%, despite rates near three-year lows” on the CNBC website. The title alone suggests that people are not identifying this opportunity. Olick sees the lack of homes on the market as the key problem for a lack of applications. Nonetheless, she spoke with chief economist of Redfin, Nela Richardson. Richardson says, “We are now starting to see sellers’ anxiety play out in the data.” Essentially, people are becoming more willing to put their homes up for sale.
Overall, mortgage rates are low and should remain so in the foreseeable future. Look at it this way as Olick has; interest rates are currently under 4%, where as in the 1980’s some loan options carried roughly 18% interest rates.
Regardless of the stock market, mortgage rates will remain low as investors find solace in the dependability of the bond market. Mortgage opportunities are increasing and home buyers need to open their eyes to the possibilities because they will not last forever.