Americans are eagerly blocking record mortgage rates, but falling interest rates aren’t really saving homebuyers a lot of money thanks to rising home prices.
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As mortgage rates fall to record highs again, one thing is clear: it all comes down to the pandemic.
The 30-year fixed rate mortgage was on average 2.72% for the week ending November 19, down 12 basis points from the previous week, Freddie Mac FMCC,
reported Thursday. The 30-year rate is almost a percentage point lower than it was a year ago. During this same period in 2019, these loans had an average rate of 3.66%.
The 15-year fixed-rate mortgage fell six basis points to an average of 2.28%, while the 5-year Treasury-indexed variable rate hybrid mortgage fell 26 basis points to 2 , 85%.
Disappointing reports on the state of the national economy have contributed to the downward trend in rates taken over the past week.
“Weaker consumer spending data, which accounts for the majority of economic growth, has driven mortgage rates to a new high,” said Sam Khater, chief economist at Freddie Mac, in the report, adding that nonetheless ” strong housing demand continues to have a domino effect on many other segments of the economy.
Mortgage rates roughly follow the direction of long-term bond yields, including the 10-year T-bill TMUBMUSD10Y,
Bond yields have been on a roller coaster ride in recent weeks. Positive developments regarding several coronavirus vaccine candidates, including those from Pfizer PFE,
and Moderna mRNA,
raised investor optimism for an economic recovery. At the same time, the country continues to see a record number of COVID-19 cases and an increase in deaths, a sign that the pandemic is getting worse before it gets better.
Meanwhile, Americans’ feverish appetite for homes quickly reduced the supply of available listings, pushing up prices. As a result, record high mortgage rates don’t really translate into huge savings as much as they did before.
“The sharp increase in home prices diminishes the benefit of lower mortgage rates,” said George Ratiu, senior economist at Realtor.com. “For buyers today, the current rate combined with higher prices translates into a savings of just $ 4 per month on a mortgage payment. “
