The Washington Post - 21.03.2020

THE WASHINGTON POST

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SATURDAy, MARCH 21, 2020

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rates. Mortgage rates are more

closely linked to long-term bonds.

The yield on the 10-year Treasury

grew to 1.18 percent Wednesday,

its highest level this month. With

institutional investors selling

bonds to raise cash, the 10-year

yield has more than doubled

since earlier this month.

“Under normal circumstances,

we would see the bond market

Mortgage Rates

BY KATHY ORTON

The housing market, which is

being curtailed by fewer buyers

out looking at h ouses, took anoth-

er blow this week as mortgage

rates soared.

According to the latest data

released Thursday by Freddie

Mac, the 30-year fixed-rate aver-

age climbed to 3.65 percent with

an average 0.7 point. (Points are

fees paid to a lender equal to 1

percent of the loan amount and

are in addition to the interest

rate.) It was 3.36 a week ago and

4.28 percent a year ago. The 30-

year fixed rate hasn’t been this

high since mid-January.

The 15-year fixed-rate average

jumped to 3.06 percent with an

average 0.7 point. It was 2. 77

percent a week ago and 3.71 per-

cent a year ago. The 15-year fixed

average rose above 3 percent for

the first time since late January.

The five-year adjustable rate

average rose to 3.11 percent with

an average 0.2 point. It was 3.01

percent a week ago and 3.84

percent a year ago.

“Mortgage rates jumped sharp-

ly this week, as volatile swings in

stock markets, government

spending to help cushion the

growing fallout from the corona-

virus crisis and underlying stress-

es in the broader markets weak-

ened demand for government

debt,” said Matthew Speakman, a

Zillow economist.

The Federal Reserve slashed its

benchmark rate to zero on Sun-

day and began purchasing

$500 billion in U.S. Treasurys and

$200 billion in mortgage-backed

securities, a move reminiscent of

the Great Recession’s quantita-

tive easing program.

“What the Fed did in lowering

the overnight rate is mainly an

attention grabber,” said Dick Lep-

re, a senior loan officer at RPM

Mortgage in San Francisco. “It

doesn’t have that much effect on

anything. But it sure got every-

one’s attention. ... I think the

most important thing the Fed did

was to announce they were going

to increase the money supply by

buying Treasurys and buying

mortgage debt.”

It is important to remember

the Fed does not set mortgage

improve as stocks plummet, but

we are not in a normal market,”

said Elizabeth Rose, certified

mortgage planning specialist at

AmCap Home Loans in Plano,

Te x. “Stocks are taking a beating

but instead of money flowing into

bonds — thus rates improving —

investors are selling bonds to

cover margin calls.”

But even more than rising

bond yields, the number of bor-

rowers seeking to refinance has

kept mortgage rates higher than

they normally would be.

“There’s a massive amount of

inbound inquiry coming into the

system,” said Craig Strent, CEO of

Apex Home Loans. “So much so

that rates should actually be a lot

lower than where they are on the

technical factors. And rates are

staying stubbornly high right

now because of capacity issues in

the system.”

Because many people are stuck

at home with time to search the

Internet and rates near all-time

lows, mortgage lenders are facing

a tsunami of mortgage applica-

tions. The Mortgage Bankers As-

sociation’s market composite in-

dex, which measures total loan

application volume, decreased

8.4 percent last week, mainly be-

cause rates ticked up. But volume

was significantly higher than it

had been a year ago.

“Low rates continue to lead to a

substantial amount of mortgage

applications,” said Bob

Broeksmit, MBA president and

CEO. “Despite a slight pullback in

activity last week from the robust

levels seen two weeks ago, refi-

nance and purchase applications

were up on an annual basis by 402

percent and 11 percent, respec-

tively. With rates expected to re-

main low for the foreseeable fu-

ture, the mortgage industry is

committed to playing a role in the

economic stimulus efforts by

helping homeowners more effi-

ciently refinance their mortgag-

es, thereby reducing their month-

ly payments.”

The refinance index dropped

10 percent, while the purchase

index slipped 1 percent. The refi-

nance share of mortgage activity

accounted for 74.5 percent of ap-

plications.

[email protected]

Figures move sharply higher in bond market sell-off

Source: Freddie Mac

Weekly averages for

popular mortgage types

3.06

THE WASHINGTON POST

6%

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5

3

2

1

’18 ’19 ’20

3.65

30-YEAR FIXED

15-YEAR FIXED

5-YEAR ARM

3.11

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