Mortgage rates for home purchase have achieved a new record low by touching 3.37% after 3.56% the last week. Before the new record was achieved in the second quarter of 2020, the record low was set at 3.50%. With low interest rates, many homebuyers have gained a bargain even though the housing market is running low on the inventory. The main factor for such dramatic changes in the sector is the outbreak of COVID-19. Still, many are trying to ease their losses after the outbreak so many lenders are providing mortgages with minimum risk only. What are the catch behind getting low mortgage rates for refinancing and home purchasing?
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Average Mortgage Rates Dropping Since December 2019
Mortgage rates are dropping from month to month since December 2019. Average rates for 30-year mortgage rates were set at 3.9% in December 2019. The rates dropped from 4.54% recorded in late February of the same year. Rates continued with consecutive dropping, finally ending up at new record lows at 3.37%. Following that pattern, mortgage rates could continue with decreasing rates for weeks and even months.
Fixed Mortgage Rates Could remain Between 3% and 3.5% in 2020
Mark Zandi, chief economist at Moody’s expects the fixed mortgage rates in 2020 to stick with 3% to 3.5%. Although the rates are more than favorable for new buyers and those who are taking refinancing mortgages, there is a catch. Lenders are becoming more careful amidst uncertainty and fear of a potential recession as a consequence of the COVID-19 outbreak.
Lenders More Careful with Mortgage Approvals
To create a shield against losses amidst a potential recession as seen back in 2008, many lenders are not accepting high and medium risk mortgage applications. Low interest rates are thus mainly granted to borrowers with good and excellent credit scores, home of equity, and favorable proof of income.
