Rates for a 30-year and 15-year fixed mortgage fell to all-time lows this week as a resurgence in the pandemic caused investors to buy more bonds, including mortgage-backed securities.
The average rate for a 30-year fixed mortgage was 3.03%, down from 3.07% last week. That marks the lowest in a data series that goes back to 1971, Freddie Mac said in a statement Thursday. The average 15-year rate fell to 2.51%, the lowest in almost 30 years of data, according to the mortgage financier.
Mortgage rates fell as investors reacted to news of a record-setting COVID-19 resurgence in some of the nation’s biggest states. The surges erased optimism from last month’s economic reports showing the jobs market recovering quickly from the virus-induced recession.
The low mortgage rates will boost demand for housing, but it’s a delicate balance, said Sam Khater, chief economist of Freddie Mac. Bad economic news pushes mortgage rates down. However, if states are forced to close businesses again and job losses mount, it will eat into the reservoir of people eligible to purchase properties.
“The summer is heating up as record low mortgage rates continue to spur homebuyer demand,” Khater said. “However, it remains to be seen whether the demand will continue if COVID cases rise to the point that it hinders economic growth.”
The resurgence in the pandemic has “already been much worse than we anticipated, and further restrictions will likely be required in some states to bring the virus under control,” the economists led by Goldman Sachs Chief Economist Jan Hatzius said in a report issued on Saturday.
Mortgage rates have fallen as bond investors’ concerns about a surge in forbearances in April and May has subsided. If layoffs spike, those numbers will mount again, said Joel Naroff, president of Naroff Economics.
The beefed-up unemployment provision in the CARES Act, which adds $600 a week to state payouts in an effort to fully replace salaries, is set to expire on July 31.
“If you’re a middle-income household with a job loss, that $600 a week could mean the ability to pay your mortgage and if it goes away it could put pressure on the housing market in terms of either mortgages or rents,” Naroff said.
The Federal Reserve, which rescued the bond markets in March and April by restarting a fixed-asset-buying program used during the 2008 financial crisis, is still purchasing about $4.5 billion of mortgage-backed securities a day, said Walt Schmidt, FTN Financial’s head of mortgage strategy.
“If it weren’t for the Fed, mortgage rates would be a lot higher,” Schmidt said. “The Fed buying MBS is keeping rates low. The Fed can’t control Fannie Mae and Freddie Mac, but it’s controlling what it can.”