JULY 20, 2020 – MORTGAGE RATES FALL TO RECORD LOWS
The average rate on a 30-year fixed mortgage fell to 2.98% last week, the lowest levels in almost 50 years of record keeping. As a result, applications to refinance a home loan, which are most sensitive to weekly rate moves, jumped 12% for the week and were 107% higher than a year ago. However, existing home sales fell 9.7% in May from the month before and 17.8% in April.
The record low rates caused Fannie Mae to improve its housing outlook for the second half of 2020. Doug Duncan, Fannie Mae’s chief economist, estimates nearly 60% of all outstanding loan balances have at least a half-percentage point incentive to refinance now.
Demand from buyers is 16% stronger than it was a year ago, as people are still seeking to buy homes despite the continued economic uncertainty and high unemployment caused by the pandemic. Builders had to shut down in March and April, which has caused a lack of supply and rising prices, especially in less expensive homes. This is good news for residential construction as they are working all out to meet demand. Mortgage applications to buy new homes were up 50% in June on a year-over-year basis.