May 20, 2020
Mortgage rates fell again today. Whereas yesterday's improvements arrived in choppy fashion only after many lenders quoted higher rates in the morning. Today's improvement was more conclusive and more consistent from lender to lender. While there were a handful of mid-day improvements in response to bond market strength, most lenders were at least as low as they'd ever been to start the day. Many lenders were decidedly lower, bringing the average top tier conventional 30yr fixed quote dangerously close to cracking below the 3.0% barrier.
If you're hearing about rates in the high 2% range, shaking your head, and scoffing, know that you are not alone. It continues to be the case that rate offerings vary quite a bit from lender to lender. They can also be vastly different for different scenarios. What may seem like a "top tier" scenario to one person due to their 800 credit score and sizeable equity is actually not that great due to some other aspect of the quote (a "cash-out" refinance as opposed to a "no-cash-out" refinance is a popular reason for this).
Scoffing or not, this is definitely the new reality for rates. If we consider that the outlook for economic growth and inflation are two key considerations for interest rates, it's not hard to accept that we could and should be at new all-time lows. The bigger question is how much lower can we and will we go? There's no way to answer that with certainty. What I can tell you is that lower rates are just as possible as any other outcome, but they're increasingly likely to find a sideways range at new all-time lows (or close to them) in order to work through the surge in refinance volume associated with such movement.
Loan Originator Perspective
Bonds continued yesterday's rally today, posting moderate gains. Several lenders improved their pricing as a result. Federal Reserve meeting minutes confirmed the obvious, covid-19 has (and will continue to) devastated the US economy. I'm locking loans approved by underwriting, but in no big hurry to lock new applications. -Ted Rood, Senior Originator, Bayshore Mortgage
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.