5
EZTHEWASHINGTONPOST.
SATURDAY,AUGUST1, 2020Mortgage Rates
BY KATHY ORTONMortgage rates didn’t move
much this week, but they went
down enough to cross a signifi-
cant marker.
According to the latest data
released Thursday by Freddie
Mac, the 30-year fixed-rate aver-
age slipped to 2.99 percent with
an average 0.8 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 3.01 percent a week
ago and 3.75 percent a year ago.
It is just the second time the
30-year fixed rate has fallen
below 3 percent. It was 2.98
percent two weeks ago.
Freddie Mac, the federally
chartered mortgage investor, ag-
gregates rates from around 80
lenders across the country to
come up with weekly national
average mortgage rates. It uses
rates for high-quality borrowers
who tend to have strong credit
scores and large down payments.
These rates are not available to
every borrower.
The 15-year fixed-rate average
slid to 2.51 percent with an
average 0.7 point. It was 2.54
percent a week ago and 3.20
percent a year ago. The five-year
adjustable rate average fell to
2.94 percent with an average 0.4
point. It was 3.09 percent a week
ago and 3.46 percent a year ago.
Low rates fueled the revival of
the housing market after the
Great Recession. But lately they
are a source of frustration. Hom-
eowners want to refinance but
struggle to reach banks and
lenders because of how busy they
are. Home buyers want to take
advantage of the low rates, but
the few number of homes on the
market are driving up housing
prices and making selections
scarce.
And as attractive as these rates
are to borrowers, few can obtain
them. Many lenders are putting
restrictions on loans, particular-
ly if a borrower wants a cash-out
refinance or jumbo loan or has a
poor credit score.
“Because of financial uncer-
tainty brought about by the pan-
demic, many lenders have tight-
ened their restrictions on jumbo
loans,” said Glenn Brunker,
mortgage executive with Ally
Home. “Some lenders have gone
as far as not offering jumbo loans
or only making them available to
existing customers.... It’s im-
portant to know jumbo mortgag-
es aren’t just for the super-rich.
Borrowers in areas where real
estate prices tend to be higher,
such as California, New York,
Boston, Miami and Washington,
D.C., may need jumbo loans to
even achieve homeownership."
At its meeting this week, the
Federal Reserve held firm on
interest rates and its bond-buy-
ing program. Even though the
Fed didn’t change its benchmark
rate, mortgage rates still fell.
That’s because the central bank
doesn’t set home loan rates. But
its decisions influence them.
“The Fed will continue to
purchase residential and com-
mercial mortgage-backed securi-
ties to keep the market liquid,
which we have learned is a must
for the entire economy,” said
Mitch Ohlbaum, president of
Macoy Capital in Los Angeles. “It
is no surprise they are not mov-
ing on the Fed funds rate at this
point in time as they need to
keep any tools they have handy
when/if things do get worse. As
far as banks/lenders are con-
cerned, they are still unwilling tolower rates any further and you
might see some lenders increase
rates to keep volume manage-
able.”
Bankrate.com, which puts out
a weekly mortgage rate trend
index, found more than half of
the experts it surveyed expect
rates to go down in the coming
week.
“What we have at present inthe U.S. is a deflationary gap,”
said Dick Lepre, senior loan
officer at RPM Mortgage in Ala-
mo, Calif. “A deflationary gap is
the difference between potential
and actual GDP. The economy is
akin to an overstocked store with
too f ew c ustomers. The appropri-
ate correction is lower prices.
This downward pressure on in-
flation should drive Treasury
yields and mortgage rates lower.”
Treasury yields have fallen the
past couple of days. The yield on
the 10-year Treasury sank to a
near record-low 0.58 percent
Wednesday. Yields run counter
to price. When prices rise be-
cause demand is g reat, yields fall.
“While [the] media emphasiz-
es how bad things are in the U.S.,
the fact is that things are worse
elsewhere,” Lepre said. “We will
continue to see flight-to-quality
buying of U.S. Treasury debt and
GSE debt. This is likely to persist
through most of 2021.”
Meanwhile, mortgage applica-
tions were flat last week. Accord-
ing to the latest data from the
Mortgage Bankers Association,
the market composite index — a
measure of total loan application
volume — decreased 0.8 percentfrom a week earlier. The pur-
chase index fell 2 percent from
the previous week but was up 21
percent year over year. The refi-
nance index slipped 0.4 percent
but was 1 21 percent h igher t han a
year ago. The refinance share of
mortgage activity accounted for
65.1 percent of applications.
“Mortgage rates remained
near record lows for convention-
al loans last week, and refinances
in the conventional sector con-
tinued to slightly increase,” Mike
Fratantoni, MBA’s chief econo-
mist, said in a statement. “How-
ever, rates on FHA loans rose,
leading to an almost 18 percent
drop in FHA refinances. Home
buyers stepped back slightly, and
there was a larger drop in pur-
chase application volume for
FHA, VA and USDA loans. This
trend, along with the fact that
average loan sizes are increasing,
indicate that prospective first-
time buyers are being impacted
more by the rising economic
stress caused by the resurgence
in covid-19 cases, as well as the
uncertainty on how the next
round of government support
will take shape.”
[email protected]For 2nd t ime on record, 30-year a verage is under 3%
DAVID PAUL MORRIS/BLOOMBERG NEWS
Homes in Oakland, Calif. Home buyers want to take advantage of low mortgage rates, but the paucity of homes on the market is driving up
housing prices. They are also struggling to reach banks because of how busy banks a re during the coronavirus pandemic.Source: Freddie MacWeekly averages for
popular mortgage types2.51THE WASHINGTON POST5%4321’18 ’19 ’202.9930-YEAR FIXED
15-YEAR FIXED
5-YEAR ARM2.94Figures are attractive,
but lenders are putting
restrictions on loans