< Back to JVM's Blog

Rates Hit Another All-Time Low… Yawn; Why and Will They Go Lower?

A computer is pulled up to a document about mortgage rates on a desk with a houseplant in an office facing a window with a view of the neighborhood.

Rates edged lower again, allowing me to quote the lowest 30-year fixed-rate I have ever quoted (see our rates here).

MARGINAL DROP/MARGINAL HELP FOR CONSUMERS

Rates only fell marginally though, so it is not like borrowers with currently locked rates are missing the boat.

In addition, b/c the mortgage industry cannot begin to process all of the refi requests flooding in, many (if not most) lenders are currently not offering lower rates, in a continued effort to fend off excess volume.

YAWN FACTORS

The reasons for “yawning” include the fact that we now seem to get news of more unprecedented records every week (and nobody really knows what to make of it) and the fact that the mortgage industry is so mired in excess volume that it can do little to react.

WHY DID RATES DROP – THE MARKET; NOT THE FED

The Fed released comments yesterday, stating the usual – economy bad; outlook not good; we’ll stay the course; rates will stay low; blah, blah, blah…

And rates didn’t budge in response.

BUT, this morning, economic data surfaced that showed the actual damage from the COVID-19-related shutdowns: GDP shrank 33% (a record), and initial jobless claims continue at a record pace.

And, as is almost always the case, weak economic news portends lower rates.

This is another reminder too that market pressures typically influence rates much more than the Fed.

WILL RATES DROP FURTHER – RISK AND CAPACITY

I address this often, but the spread between the 10 Year Treasury and the average 30-year mortgage rate is about 2% right now, and much higher than where it normally is (below 1.5%).

Hence there appears to be room for an even larger rate drop.

BUT, extra risk (from the COVID-19 crisis) and capacity issues (mentioned above) continue to keep rates higher than what somebody might otherwise expect upon seeing our near-record-low 10 Year Treasury yields.

It is interesting too to note that rates were about 1/2% HIGHER when the 10 Year Treasury hit a trough like this back in March.

So, the spread is definitely tightening; it just remains to be seen if it will continue.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

Tags: , ,

Get in touch with us

Guaranteed 60-minute response to emails and voicemails during operating hours.