Will The Fall See Lower Mortgage Rates?

Some good news that will come out of the prolonged shutdown from the coronavirus will be mortgage rates falling below 3% this fall. The economic rebound will depend on how long the coronavirus will keep the country shut down.

“Looking forward, while rates may rise from week to week, we expect the overall trend to be downward, with rates sliding below 3 percent by the end of 2020,” said Danielle Hale, chief economist at Realtor.com.

The future mortgage rates will probably once again be based on the direction of the yield on the 10-year Treasury note. During the COVID-19 crisis, the economy has deteriorated and the mortgage industry has become stressed leaving the relationship between bond yields and mortgage rates declining. The unstable recovery along with stabilization in the mortgage market will allow mortgage rates to remain very low.

Federal Reserve Chair Jerome Powell has expressed that the recovery from the coronavirus might be a rocky one, he quotes that “the scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II.”

“The gloomy remarks led investors to seek out the safety of Treasuries, movements that generally push mortgage rates lower,” said Zillow ZG, 4.71% economist Matthew Speakman.

The 30-year fixed-rate mortgage mid-May averaged 3.28%. This was an uptick of two basis points from the beginning of May which was at 3.23% but it was down from the 4.07% reported this time last year. The 5-year Treasury-indexed hybrid adjustable-rate mortgage was at 3.18% and the 15-year fixed-rate mortgage was reported at 2.72%.

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