U.S. Mortgage Rates ‘Somehow, Some Way’ Rise Amid Market Turmoil
Rates for 30-year U.S. mortgages rose from a record low as overwhelmed lenders lifted borrowing costs to curb an onslaught of business.
The average rate was 3.36%, up from 3.29% last week, which was the lowest in 49 years of data-keeping, Freddie Mac said in a statement Thursday.
That’s not what’s supposed to happen with markets in turmoil and Treasury yields — the benchmark for mortgage rates — hitting record lows. But these aren’t normal times.
“Somehow, some way, mortgage rates actually moved higher this week,“ Matthew Speakman, an economist at Zillow, said late Wednesday in a statement on the company’s own mortgage rates survey. “Some are speculating that lenders may be artificially buoying advertised rates in order to stem this rising tide ofrefinancing activity and simply keep up with demand.”
The surge of homeowners seeking to cut their monthly bills is overwhelming lenders who are struggling to respond to inquires and get loans processed. At the same time, investors who typically rush into bonds during uncertainty, such as the current coronavirus pandemic, are instead selling them off, Speakman said.
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Mortgage bonds are less valuable now because of the refinancing surge, he said. When borrowers repay mortgages early, investors are forced to find other places to deploy money, presumably at a lower yield.
“All else equal, if refinancing activity begins to slow, then rates will almost certainly trend back down,” Speakman said.
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