Are Mortgage Rates Going To Drop?
Mortgage rates in the U.S. have dropped significantly following the outbreak of the Covid-19 pandemic. In addition, the Federal Reserve's monetary policy has lowered consumer-borrowing costs. Many of our clients at Lynx Mortgage Bank LLC are now wondering:
- Are mortgage rates going to drop even further?
- How do today’s mortgage rates affect people looking for mortgages in New York?
As the Covid-19 pandemic risks shutting down economies, the U.S. Federal Reserve responded by pumping more money into the economy. Consumer borrowing costs went down, attracting more homebuyers into the mortgage market. For the mortgage lender, the reduced cost of borrowing is bad for business. Therefore, some mortgage companies in the U.S. have introduced stricter measures for lender refinancing.
Reduced Mortgage Rates
U.S. mortgage rates dropped to 3% in 2020 because of the monetary policies implemented by the Federal Reserve. This change made the mortgage market favorable to potential homeowners and investors looking to benefit from the rates drop. For instance, 30-year fixed-rate mortgages decreased to 3% from a steady 3.42% in the previous years. As of August 2020, mortgage rates fell to 2.98%, making the mortgage market more enticing. Few lenders were willing to offer loans at below 3% rates. With prices expected to drop even further, some lenders opted to exit the market altogether.
Increased Refinancing Penalties to Lenders
Mortgage firms have further tightened the noose on lenders by slapping a 0.05% fee on all refinanced mortgages sold back to the corporations. As a result, mortgage-lending institutions that chose to stay in the market imposed stricter credit guidelines on potential borrowers. While mortgage rates plummeted, the number of people qualifying for the sub-3 percentile rates dropped as well.
Higher Closing down Costs
The 0.05% levy passed to lenders trickled down to the consumers. Anyone looking to lock in on the dropped rates also had to contend with higher closing down costs. Instead of closing down with a rate of 2.8 to 3 percent, the revised rates oscillated between 3 and 3.25 percent.
Historically, these rates are still low for potential homeowners. Given that 30-year fixed mortgages escalated to 3.6% in the past, closing down at 3.25% was still a big deal for homebuyers and real estate investors. Financial markets experts speculate the low rate may remain for a while.
Will Mortgage Rates Drop Even Further?
Financial analysts expect residential mortgages to increase towards the end of 2020. As U.S. elections draw near, consumers optimistic of a better political climate will be willing to bet on mortgage loans rather than mortgage bonds. The same situation was experienced before the 2016 U.S. elections. Mortgage rates skyrocketed because consumers expected a business-friendly government after the elections.
Some investors project the possibility of lower rates towards the end of the year. They speculate mortgage rates may go even further down should the democrats win the elections. However, these are just speculations.
Finding a Long Island NY mortgage broker to work with before the end of the year may be a good idea. Contact Lynx Mortgage Bank at 877-599-LYNX to learn more about our products and programs.