Mortgage Rates Hit Marks Never Seen Before

I made a post about mortgage rates back on February 21st noting at the time that mortgage rates were hovering around all time low marks. At that time I noted that I thought there was potential for them to go lower if the corona virus escalated, particularly in the U.S.  Since I made that post that’s exactly what’s happened and interest rates have dropped to figures I’ve never seen in my 15 years in the industry. 

The corona virus has brought chaos to financial markets like few other things have. The fallout around it is unprecedented and unlike we’ve seen before. This is particularly true for interest rates and the mortgage market.  In many ways, things are more chaotic now than they were in 2008 but in a different way. Mortgage rates, which are tied to the yield on the 10 Year Treasury Bond, typically track with the stock market as it rises and falls.  However over the past week the yield on the 10 Year Treasury has plummeted nearly in half from where it was at the start of February as investors across the world seek safety for their money even if it means little to no return.

The day after I made that post on the 21st the stock market began to experience some serious drops and on Friday February 28^th it bottomed out to a recent low after some of the largest daily point losses in history.  Interest rates started dropping along with the market and the yield on the 10 Year Treasury.  February 28^th is the first time I’d ever seen a 30 Year Fixed Conventional loan show up on a mortgage rate sheet offered at 2.875% with only a small loan discount cost!  Rates on 5 Year ARM’s and 15 Year Fixed are low as well but there’s not as much of a drop between them and a 30 Year Fixed as we typically see.  That’s because the 30 Year Fixed is so ridiculously low right now!

The market went back up on Monday March 2^nd and throughout this past week it’s bounced around between gains and losses, and interest rates have followed in concert. Some days we will have multiple re-prices as rates go up with the market and other days it goes the other direction. Although the rates/pricing haven’t been as good as they were on Friday the 28^th, they are still in uncharted territory hovering around the 3% mark for well qualified borrowers on purchases and rate/term refinances for standard conventional loans. High balance conventional loans ($510k-$740k) are also fantastic and just slightly above the rates for conventional loans.

That’s enabling borrowers who were already sitting in great loans in the upper 3’s to consider a refinance.  The question they all borrowers should ask on a rate/term refinance is what are the costs of refinancing, how much will I save on my monthly payment, how long will it take for me to make up the loan costs with the savings and will I still have the property and loan past that point.  I’ve ran those numbers for multiple people during the past week and many are seeing that they’d make up the costs in a year or less of having the loan. If you’re holding the property past that you’re going to get to enjoy that low rate for the remaining time that you do.  You could also consider continuing to pay or occasionally paying the amount you have been thereby quicker reducing your principal balance, interest generated and time to pay-off the mortgage. 

Some borrowers are taking this opportunity to move into shorter term loans such as 15, 20 or 25 Year amortization which in combination with the low rates may result in little or no change in payment. Each borrowers situation is different and considering refinancing requires having a mortgage professional reviewing it with you and giving you input on what would best for your specific scenario.

Buyers who are in the midst of this highly active market in the Seattle area are excited about the opportunity that these mortgage rates are providing. The lower rates mean either lower payments for the property you want or the opportunity to qualify or purchase a higher priced property.  The challenge can be finding that property right now but once you do you’ll be assured to have the potential to lock in some of the lowest interest rates ever seen to complete your purchase.  Depending on the lending/funding source being used there may also be the potential to float down to a lower rate than you lock in at if the rates and pricing improve. Each of my funding sources handle that a bit differently but all have options for it.

One element that everyone getting a home loan right now needs to be aware of is that the industry is getting flooded with applications. Being able to complete the process including an appraisal in 30 days or less is going to be next to impossible.  I’m locking all borrowers on purchases for 45 days and refinances and 60 days with the expectation that underwriting turn times will be slower than normal and appraisers will be so busy that it may take a week or two to get an appraisal done. We’ve experienced this in the past when rates have been really low so I’m preparing all my clients to expect it if they are going to be getting a mortgage in the near future.

As we start this week I’m not sure what exactly to expect as we saw the market bounce up and down over the past week.  I do think that we may not have seen the end of the large stock market drops as it seems that the fears around the corona virus are not going away and seem likely to get worse rather than better.  If that continues to push the market down and yields on 10 Year Treasuries go lower we may see the interest rates get even lower.  It’s also possible that mortgage lenders hold them in this same range to slow up what’s likely to be an onslaught of refinancing. What I can know for certain is that we are in a really unusual time for home loans where some opportunities are around for people to access interest rates that we’d never even considered to be possible in the past.  If you’re curious about what options you may have to take advantage of these low rates please reach out to me via phone, text or email and I’m happy to discuss them with you.