There has perhaps never been a better time to take out a mortgage, at least from an interest rate perspective. But finding a bank willing to lend you can be difficult these days.
The 30-year fixed rate mortgage was on average 2.90% for the week ending September 24, up three basis points from the previous week, Freddie Mac FMCC,
reported Thursday. Two weeks ago, the average 30-year loan rate fell to an all-time low of 2.86%.
The 15-year fixed rate mortgage rose five basis points to an average of 2.4%, while the 5-year Treasury-indexed variable rate hybrid mortgage fell six basis points to 2 , 9% on average.
An accommodating outlook from the Federal Reserve – indicating that the central bank is expected to keep rates low for many years to come – has kept long-term bond yields low, including the 10-year T-bill TMUBMUSD10Y,
Historically, mortgage rates have roughly followed the direction of the 10-year Treasury note, but since the onset of the coronavirus pandemic, the gap between the two had widened. In recent weeks, however, the two have moved in a more synchronized fashion, with mortgage rates falling to the 10-year rating.
Low mortgage rates fueled the housing market as they forced potential buyers to speed up their deadlines in order to lock in cheap financing.
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But finding a mortgage lender who is ready to lend you is a more difficult task than it has been in many years. A recent Mortgage Bankers Association report, an industry trade group, found that mortgage credit availability fell to its lowest level since March 2014.
“Credit continues to tighten amid continued uncertainty over the health of the labor market, even as other data on loan applications and home sales show a sharp rebound,” said Joel Kan, associate vice president of economic and industrial forecasting for the Mortgage Bankers Association. said in the report.
In particular, banks have pulled back from offering loans that allow for lower credit scores, lower down payments, and reduced documentation. Jumbo mortgages have also become more difficult to obtain – and the rates on these loans, which are not included in Freddie Mac’s analysis, have remained much higher than the rest of the market.
Worse still for those still looking to refinance: Mortgage rates may soon increase for these loans. The Federal Housing Finance Agency recently announced its intention to introduce a new refinancing commission, which is now expected to come into effect from December. But economists suggest that there is evidence that banks are already raising rates to offset the cost of the new fees already.
The good news for those looking to secure a home loan is that economists don’t expect rates to move much in the near future. “In the absence of fundamental changes in FHFA policy or significant developments related to the virus such as a treatment or vaccine, mortgage rate movements are expected to be modest in the coming weeks,” said Matthew Speakman, economist at Zillow ZG,
This story was updated on September 24, 2020.