Interest Rates Set New Record Low
Freddie Mac has tracked mortgage rates for 50 years and the 30-year fixed rate has never been below three percent – NEVER. That changed the week of July 13, 2020 as the Primary Mortgage Market Survey showed the average 30-year rate had dropped to 2.98 percent . That survey set the seventh new record since March.
Why are rates in a free fall? The reason on the surface is obvious. A new surge in COVID-19 cases is weighing on the economy and the American public. When one looks deeper, however, other reasons start to emerge.
Earlier this year, mortgage bankers were flooded with refinance applications as uncertainty surrounding the economy began to swirl. The result was a spike in interest rates as lenders reacted to demand. In short, many were understaffed and raising rates was intended to slow the pace at least long enough to catch up with the backlog.
James Baublitz, managing director at Compass Analytics, says in an article published Forbes.com that mortgage bankers staff assume a certain production volume. They tend to wait before making a hiring push, but with market disruptions, he says those factors delayed hiring decisions needed to meet increasing demand.
“Nonetheless lenders have been able to staff up, catch up, and are beginning to have the confidence to hire further. That in turn allows them to lower margins (their primary tool in controlling capacity) and thus lower primary rates ,” he says.