May 18, 2020
Mortgage rates hit all-time lows on Friday, based on the average rate for a top tier conventional 30yr fixed loan scenario. At that time, I raised the question as to whether that was really "news" considering we were already in line with all-time lows on Thursday and that rates have generally been pushing into an all-time low range during the coronavirus saga. In fact, as far as bond markets are concerned (and they're typically all that matters), we should have seen 10-20 days of new all-time lows so far in 2020. It's only due to the COVID-related mortgage market effects that mortgage rates have been on a delayed timeline relative to the broader bond market.
So can we rest assured that rates will continue to press into all-time lows in a gradual manner? Actually, no... not if today is any indication. Bond markets weakened significantly and mortgage rates rose somewhat abruptly, depending on the lender. Whether this should trouble you is a matter of debate considering the average lender remains in the 3.00% - 3.250% range for 30yr fixed quotes. On any other day besides last Friday, this would basically be an all-time low.
That offers some solace and/or perspective for today, but how about the future? Are we headed back to all-time lows? There will never be a way to know such things with certainty ahead of time. The best way to look at these things is to discuss how clear it is that a certain outcome is within the realm of possibility. With that in mind, we can continue to say that new all-time lows are every bit as possible as any other outcome for now. That said, those with the shortest time horizons shouldn't count on it happening this week if faced with a "lock vs float" decision.
Ongoing Reminder on Forbearance
Coronavirus has created unprecedented challenges for people and industries. For homeowners facing a big reduction in income due to coronavirus-related hardship, a forbearance can make excellent sense. But for those who have the capacity to continue making mortgage payments, there are downsides to consider. Forbearance itself does not hurt your credit score, but it does show up on your credit report. This will affect your ability to qualify for a loan in the present and near future. It can also result in your other creditors decreasing your available credit balances. This has the unintended effect of increasing your ratio of debt to available credit which is a key component of credit scoring models. Thus, even though forbearance itself is not hurting your credit, it can indirectly lower your credit score and it will absolutely impact your mortgage creditworthiness in the short term.