Mortgage rates have broken records for the eleventh time this year, as they continue to slide amid economic uncertainty and increasing loan origination capacity. That's been a boon for both current homeowners, who can lower their monthly payments by taking advantage of lower rates, and prospective homeowners, who can borrow more for the same monthly payment.
Interest on the average for a 30-year fixed-rate mortgage last week was 2.8 percent and the average for a 15-year fixed-rate mortgage was 2.3 percent, according to government-sponsored mortgage-finance company Freddie Mac. That's roughly two percentage points lower than either were at the end of 2018.
While low rates are good for homeowners, they're a sign of a troubled economy. When investors become nervous, they seek safer investments and pour money into government bonds and mortgage debt — much of it backed by Freddie Mac and its sister company Fannie Mae.
Investors are so hungry for security that they are willing to accept lower yields, driving down the interest paid on bonds and mortgages. Actions by the Federal Reserve to support the economy, including cutting short-term rates to near zero and buying government- and mortgage-backed bonds, are also driving down mortgage rates.
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"Interest rates slid again this week because still-elevated unemployment claims point to a slow economic recovery and hopes for a fiscal stimulus package in Congress remain cloudy," said George Ratiu, senior economist for the real estate listing site realtor.com, in an emailed statement. "Investors moved to the relative safety of mortgage bonds..."
In fact, rates fell so significantly during the start of 2020 that the number of homeowners who wanted to refinance their homes overwhelmed loan originators. That meant mortgage companies did not need to compete on price as fiercely as they usually would, because they did not have the bandwidth to take on more customers. Now, mortgage companies have had time to increase their bandwidth, and prices have edged lower as a result.
However, Ratiu pointed out that home prices, which in the Houston area have actually grown more this year than the year before, are rising so quickly that even record-low mortgage rates are a small comfort. He explained that "buyers are finding that price gains are outpacing their wage growth and stunting their borrowing potential."
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October 22, 2020 at 10:21PM
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Mortgages break records for all-time low for 11th time this year - Houston Chronicle
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