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Oct. 24, 2020, 10:07 a.m. EDT

Mortgage rates fall to record lows for the 11th time this year, but new challenges for first-time buyers remain

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Jacob Passy

Mortgage rates continue to trend downward as the realities of the coronavirus pandemic and uncertainty surrounding the upcoming presidential election put pressures on the market.

The 30-year fixed-rate mortgage averaged 2.8% for the week ending Oct. 22, falling one basis point from the record low set just the week prior, Freddie Mac FMCC /zigman2/quotes/202741363/delayed FMCC +5.06%   reported Thursday . The new record low stands nearly a full percentage point below where rates were a year ago. During this same time in 2019, these loans had an average rate of 3.75%.

This was the 11th week in which mortgage rates set a new low in the roughly 50-year history of Freddie Mac’s weekly mortgage rates report. To put that in context: On average, rates have fallen to a record low roughly once every four week this year.

The 15-year fixed-rate mortgage meanwhile decreased two basis points to an average of 2.33%, while the 5-year Treasury-indexed hybrid adjustable-rate mortgage dipped three basis points to 2.9% on average.

Also see: ‘It’s daunting to think about what the consequences will be.’ With no stimulus deal, much of America’s temporary financial safety net will expire Dec. 31

The continued fall in mortgage rates means that even more homeowners, including those who bought in the last few years, could save money by refinancing, said Sam Khater, Freddie Mac’s chief economist.

Whether low mortgage rates are helping home buyers, on the other hand, is less straightforward. To be sure, lower interest rates make buying a home a more affordable prospect.

But low mortgage rates, especially when combined with the dearth of homes for sale, have pushed home prices much higher across the country. And there’s growing evidence that climbing home prices could start pushing buyers out of the market.

“With prices still rising by double-digits, buyers are finding that price gains are outpacing their wage growth and stunting their borrowing potential,” said George Ratiu, senior economist at Realtor.com. “The latest mortgage applications data highlighted the growing tension, as purchases declined for the fourth consecutive week.”

Plus, many home buyers don’t have access to the rock-bottom average rates reported by Freddie Mac. The report from Freddie Mac examines the rates on conforming loans, meaning loans that can be sold to Freddie Mac or Fannie Mae. The interest rates on other mortgage products, including FHA and VA loans, tend to be higher. And those mortgages are more popular with first-time home buyers who tend to have lower credit scores and smaller amounts saved for a down payment.

Where rates go moving forward remains unclear. Generally, mortgage rates roughly track the direction of long-term bonds, including the 10-year Treasury, though that relationship has weakened over the course of the pandemic.

“Investors are no doubt aware of the substantial levels of risk posed by the recently rising coronavirus cases across much of the country,” said Matthew Speakman, an economist with Zillow /zigman2/quotes/205077794/composite ZG +0.62% . “This uncertainty will likely keep mortgage rates mostly stable in the coming days, but with major events looming, more substantive moves in rates could be in store in the coming weeks.”

/zigman2/quotes/202741363/delayed
US : U.S.: OTC
$ 2.49
+0.12 +5.06%
Volume: 2.99M
Nov. 25, 2020 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.54 billion
Rev. per Employee
$11.51M
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/zigman2/quotes/205077794/composite
US : U.S.: Nasdaq
$ 109.45
+0.67 +0.62%
Volume: 1.06M
Nov. 25, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$25.00 billion
Rev. per Employee
$522,545
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