The 2020 mortgage market has experienced a volatile environment with rates hitting historic record lows more than nine times. With the impacts of the COVID-19 pandemic crippling the economy, the rates dropped to previously unimaginable levels as the Federal Reserve strives to spur the economy.
As of now, September recorded the lowest rates of all time. According to Freddie Mac, the average 30-year fixed-rate dropped to 2.86%.
As everything seemed to be holding on well for mortgage rates, the GSEs— Fannie Mae and Freddie Mac, sent shock waves across the mortgage market when they announced the new 0.50% fee on most refinances. However, the new fee was delayed to be effective from December 1. This leaves a small opening within which to lock in an all-time-low rate. Lenders are likely to start raising refinance rates to compensate for the fee between early October and mid-October. If you are planning to lock, this is a perfect time before the unwelcome development takes effect.
October 2020 Predictions.
The ‘adverse market refinance fee’ by the GSEs is likely to raise most refinance rates. Despite the new fee postponed to take effect from December 1, that doesn’t mean you have until December to apply for a refinance. It takes between 45-60 days to get a refinance through a lender’s process and sell off to the GSEs. Lenders will begin imposing the new fee as early as October to avoid getting stuck with the bill. So if you don’t lock in your refinance by mid-October, you could end up getting a worse rate or paying more in closing costs.
However, mortgage rates are likely to be low despite the new 0.50% fee by Fannie Mae and Freddie Mac. Moreover, according to Themortgagereports.com, the rates have bottomed out and will start rising in November as the country gets closer to elections. This is because there tends to be a sense of optimism with potential new leadership, regardless of the outgoing or incoming party. The optimism comes with more risk-taking ad less appetite for mortgage bonds. With low demand for mortgage bonds, the rates shoot up.
The Fed, through the Federal Open Market Committee recently adjourned September meeting, announced its long-term strategy of keeping the rates low for years, until at least 2023. The Fed is to keep the rates low despite any signs of inflation. The Fed is focusing more on avoiding a recession. This is
good news for the U.S average consumer since they will have access to historically low rates for years.
Housing authorities nationwide have predicted the mortgage rate trends for a 30-year rate as follows:
|Agency||30-Yr rate Prediction|
|National Association of Home Builders||3.34%|
|Mortgage Bankers Association||3.50%|
|National Association of Realtors||3.10%|
|Average of all agencies||3.18%|
The bottom line is that mortgage rates will remain historically low for some time— years, maybe. But if you’re planning to lock in your refinance, you have to do it now before it’s too late.
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Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent views of First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.firstname.lastname@example.org. Ph: 714- 475-8629.
Eric Lawrence Frazier MBA
President and CEO
The Power Is Now Media Inc