Mortgage rates fall below 3% for the first time ever

CNBC's Diana Olick reports on what's behind the fall in mortgage rates as the markets continue to head lower.

Barely a week ago it looked like mortgage rates were finally breaking higher, but in a sudden reversal, they just set a new record low.

The average rate on the popular 30-year fixed mortgage hit 2.97% Thursday, according to Mortgage News Daily, as the stock market sold off and investors rushed to the relative safety of the bond market. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury.

For top-tier borrowers, some lenders were quoting as low as 2.75%. Lower-tier borrowers would see higher rates.

“This is a very abrupt and arguably unexpected change given that last week looked like a potentially scary lift-off for rates after an extended stay near the previous all-time lows,” said Matthew Graham, chief operating officer at Mortgage News Daily. “It suggests we shouldn’t count out the ability of interest rates to maintain these levels (or improve upon them) even if the economy continues showing signs of healing.”

The market sell-off is being fueled by new concerns that there may be a second wave of the coronavirus, which already decimated the economy in April and May. Rates have been hovering above 3% for much of the past month and only broke higher last week, following a surprisingly more optimistic May employment report. That, on top of cities across the country reopening, fueled more selling in the bond market.

Interest rates also benefited from an announcement by the Federal Reserve on Wednesday that it would continue buying mortgage-backed bonds. That will keep liquidity in the lending market.

“I think rate levels will be directly tied to the ability of the economy to recover. If it goes better than expected, rates would rise, and vice versa if things remain sluggish. Either way, the Fed is committed to keeping shorter-term rates lower for longer, and that will help to anchor longer-term rates like mortgages to some extent,” added Graham.

Low rates have fueled a sharp and fast recovery in the housing market, especially for homebuilders. Mortgage applications to purchase a home were up 13% annually last week, according to the Mortgage Bankers Association.

Mortgage rates are just one piece of the puzzle. Mortgage credit availability is still key, and it fell last month to the lowest level in nearly six years, according to an MBA survey.

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[skinnaj]

Negative interest rates are coming and the market will force the fed’s hand

[hansolo]

it's heading zero or even get paid to have a mortgage.That's how crazy this world has become.

[Atipat]

Fake Money is not solutions anything


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[edmsing]

Once upon a time on American television it was possible to watch many hours and never once see a female head with kinky hair even on those shows featuring women of color, their hair was either straighten or wigged. Thank goodness those days are long gone; it was way past time for a little display of human reality. Now we are faced with a new frontier, gray hair on women, as everybody knows, women’s hair just do not gray with age…