Mortgage

COVID-19 worries are suppressing mortgage charges as instances proceed to rise

Mortgage rates fell to their lowest level in months as the recent spikes in COVID-19 cases left cautious investors few reasons to take action that could cause rates to rise.

According to Freddie Mac's Primary Mortgage Market Survey, the average 30-year fixed-rate mortgage for the weekly period ended August 4 fell to 2.77%, its lowest level since mid-February. The average rate a week earlier was 2.8% and in the same week of the previous year it was 2.88%.

"Given the global market uncertainty surrounding the delta variant of COVID-19, we saw 10-year government bond yields decline, and consequently mortgage rates followed suit," said Sam Khater, chief economist at Freddie Mac, in a press release.

While the introduction of vaccines this year spiked economic activity, fueling record spikes in inflation and concerns that the faster-than-expected recovery could overheat public finances, mortgage rates remained relatively subdued in response. The 30-year average of fixed interest rates has been at or below 3% for all but one week since mid-April.

Even with promising signs of recovery, the threat of COVID-19 has never gone far from the minds of financial markets, according to Zillow economist Matthew Speakman.

"For months, the impact of pandemic-related factors on the marketplace has far outweighed the impact of traditional economic reports, and developments over the past few weeks have fueled that trend," he wrote in a statement. "The sharp rise in the number of delta variant cases has sparked a new dose of uncertainty among investors and has questioned how quickly economic activity – and life – can return to normal before the pandemic."

The latest coronavirus data from the Centers for Disease Control gives one more reason to believe that there are more obstacles in the way of economic recovery. For the final week of July, the seven-day moving average of daily new cases rose 64.1% week-to-week as cases, hospitalizations, and deaths increased in almost all states. Mortgage rates are unlikely to rise while COVID concerns remain.

"Recent market moves reinforce the month-long notion that pandemic-related factors will continue to lead the way for the market and a sharp rise in mortgage rates looks unlikely until we get better control of COVID," Speakman said.

The Federal Reserve’s remarks also caused few waves. While the momentum for reducing bond purchases has increased lately, the Fed has not yet set a firm timetable for starting the process, indicating that the sectors hardest hit by the pandemic have still not fully recovered. The central bank launched its bond-buying program last year to alleviate the economic hardship caused by the pandemic. Fed chairman Jerome Powell added that the rejuvenation of mortgage-backed securities would start no earlier than that of government bonds, although some officials called for it due to the hot real estate market.

15-year rate remains at an all-time low
The latest interest rate figures across the board continue to favor prospective borrowers and bode well for renovations, refinances and purchases, said Khater. While 30-year mortgages hit seasonal lows, the 15-year fixed rate fell to 2.1% last week, its lowest level since the Freddie Mac survey began, and was unchanged this week. In the same weekly period a year ago, the 15-year average was 2.44%.

The 5-year Treasury-indexed adjustable rate mortgage also fell, falling five basis points from 2.45% a week earlier to 2.4%. A year ago, the 5/1 ARM averaged 2.9%.

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