Many prospective borrowers are likely to miss out.
Over the past week, mortgage rates plunged in response to concerns related to the ongoing trade war with China as well as overall economic health of the US.
The 30-year fixed-rate mortgage averaged 3.6% during the week, sliding 15% basis points down from last week according to a report collated by Freddie Mac. This is the lowest level mortgage rates have been since the 2016 presidential election, and the third-largest weekly decline this year. So far in 2019, rates have only posted an increase on eight occasions.
The 15-year fixed-rate also dropped 15 basis points to an average of 3.05%. The 5/1 adjustable-rate mortgage also declined 10 basis points to average at 3.36%.
Despite the Federal Reserve cutting the Fed funds rate last week, that change has already been accounted for and incorporated into the mortgage rates. This week’s decline likely reflected the growing misgivings about the stock markets, including worries about the trade war that continues to rage between the US and China.
Freddie Mac in its report likened it to a “tug of war in the financial markets between weaker business sentiment and consumer sentiment.” As business sentiment is weakened by negative trade and manufacturing news, consumer sentiment is buffeted by a strong labor market and low mortgage rates that will continue to spur home sales all the way through the fall season.
In the end, the declining supply of homes for sale will offset any boost the low mortgage rates would otherwise provide to the housing market.
Prospective buyers will most likely miss out on these once-in-a-generation opportunity of low mortgage rates as home prices continue to reach record highs all across the country. This makes it hard for millenials to take advantage of these savings.
One positive sidenote is that this week’s drop in mortgage rates did result in a major surge in home-loan applications, although most of this was centered around mortgage refinances rather than new home loans.
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