The average rate for a 30-year fixed-rate mortgage fell below the previous record low of 3.13% that was set in June and marks the fifth lowest since March. A year ago, the rate was 3.75%.
The data suggests that the recent rebound in economic activity has halted in recent weeks, with some declines in consumer spending and a pullback in purchasing activity, according to Freddie Mac.
“Today’s report shows that mortgage rates declined as investors reacted to the rise in Covid cases and the Federal Reserve’s worried prospects for the economic recovery,” said George Ratiu, economist at Realtor.com
Even with rates moving toward the 3% mark, lenders maintained strict underwriting standards that contributed to a decline in mortgage applications for the second consecutive week, he said.
“Such low mortgage rates, coupled with current demographics that favor home ownership, would normally lead to strong sales activity,” he said. “However, getting loan approval is proving to be a difficult challenge for many, especially first-time homebuyers struggling to get a 20% down payment.”
But the long-term picture is darker. Ratiu said real estate markets are going through a period of transition.
“On the one hand, buyers are clearly returning to the market, eager to take advantage of low interest rates as they move towards a new normal,” he said. “On the other hand, the strong resurgence in Covid cases, especially in Sun Belt states, along with increased economic uncertainty during the current recession, is preventing many sellers from entering the market.”
This week, mortgage applications fell 1.8% from the previous week, according to the Mortgage Bankers Association’s weekly application survey.
“Investors are contemplating the risks of the recent resurgence of Covid-19 cases for the labor market and the economy, and as a result Treasury rates and mortgage rates are moving lower,” said Joel Kan, associate vice president Economic and Industry Forecasting MBA.
“The weakening of activity is potentially a sign that pent-up demand is beginning to decline and that the low supply of housing is limiting options for potential buyers,” he said.
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