U.S. mortgage rates edged higher last week, even as market interest rates fell to the lowest levels on record, as lenders bumped up costs and new applications slumped amid the coronavirus pandemic.
The Mortgage Bankers Association said 30-year fixed rates rose 8 basis points in the week ending March 20 to 3.82%, the highest since January but not far off the 2012 low of 3.47% recorded two weeks earlier. The group's refinancing index, meanwhile, slumped 33.6% to 3,809.3 points, as Americans shunned both refinancings and new home purchases as the coronavirus outbreak accelerated - stocks endured their worst week since the global financial crisis.
Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines, and remote work staffing challenges,” said MBA vice president Joel Kan. “With these higher rates, refinance activity fell 34 percent, and both the conventional and government indices dropped to their lowest level in a month."
"Looking ahead, this week’s additional actions taken by the Federal Reserve to restore liquidity and stabilize the mortgage-backed securities market could put downward pressure on mortgage rates, allowing more homeowners the opportunity to refinance,” he added.
The Fed slashed its main interest rate to a record low of 0% to 0.25% on Sunday, March 15, and then said earlier this week that it will buy unlimited amounts of government bonds and mortgage-backed securities to combat what it called "severe disruptions" in the domestic economy.
The MBA's mortgage purchase index fell 14.6% to 237.4 points, the lowest since August 2019, while the overall market index fell 29.4% to 758.4 as new applications fell sharply in states that are hardest-hit by the coronavirus spread.
New mortgage applications in California, where Governor Gavin Newsom issued a state-wide 'stay-at-home' order last week, fell 23% while those in New York, the national "hot spot" in terms of infections and death rates, were down 38%. Applications in Washington state, the MBA said, fell 17%.