Time to Buy: All-Time Low Mortgage Rates
With the Coronovirus hitting the United States early in 2020, the uncertainty of what was to come heavily impacted the housing market. However, mortgage rates have steadily lowered over the past 10 years - so even if this pandemic didn’t hit, market experts still expected this to be another low year.
While these rates are based on pre-election results in October 2020, post-election could be a completely different story.
Chief economist for Freddie Mac, Sam Khater, said in an interview, “Low mortgage rates have become a regular occurrence in the current environment… As we hit yet another low, the tenth record this year, many people are benefitting as refinance activity remains strong. However, it’s important to remember that not all people are able to take advantage of low rates given the effects of the pandemic.”
For the week of October 10, 2020, the average 15-year fixed-rate mortgage is down to 2.35%, while this same week last year, the average was 3.15%. However, even with the low mortgage rates, mortgage applications were also slightly down, according to the Mortgage Bankers Association.
Refinancing applications have also been decreasing steadily at 0.3% week-over-week in 2020, which accounts for approximately 66% of mortgage applications. Refinancing applications for the week were 44% higher than the same week last year.
Mortgage rates forecast
While we can’t predict what will happen after November 3, 2020, forecasting information based on current data available can help you plan for the type of mortgage loan you’ll need. A key benchmark for mortgage rates is the 10-year Treasury. The yield on the 10-year Treasury note opened at 0.697% on Thursday, October 8, 2020, and closed the following Wednesday at 0.722%. This is due to the Federal Government’s last meeting minutes being released, which expressed their concerns about the country’s economic recovery. Before the pandemic hit in March, the note’s yield never went below 1% - even during the Great Recession.
The Federal Reserve has indicated that the short-term Federal Funds rate will stay consistent at its current range of 0% to 0.25% through 2022 or longer, which is why the Treasury yields are showing low levels. Part of the economic policy now includes an attempt at keeping the mortgage rates low so the inflation rates can rise above 2% - the central bank’s goal. The Fed, after its meeting on September 16, has committed to continuing in purchasing mortgage-backed treasuries and securities in an attempt to maintain liquidity and help control the market’s volatility.
If your mortgage rate is higher than today’s rates by more than 1%, now is the time to consider refinancing. Closing costs and refinancing fees can cut into your savings now but can save you more money in the future. Also, taking into account what your credit score is before applying to refinance is crucial in getting a lower rate.
When you’re ready to look at the next emerging housing market to buy a home in for your next rental property project, contact Renovo. Talk to one of our team members to discuss how you can continue to grow your rental property investment portfolio amid a changing market.