U.S. mortgage rates hit a fresh all-time low last week, while new applications rebounded, amid renewed optimism in the housing market as new coronavirus infections slow and states contemplate re-opening their shuttered economies.
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $510,400 fell 4 basis points in the week ending April 10 to 3.45%, the lowest on record and a full 1% lower from the same period last year.
The group's refinancing index, meanwhile, rose 10.1% to 4,242.7 points and new purchase activity fell by around 1.8%, to the lowest levels since 2015, as more than 16 million Americans filed for unemployment benefits of the past three weeks and data began to illustrate the depth of the coronavirus damage to the U.S. economy.
"The decline in rates – despite Treasury yields rising – is a sign that the mortgage-backed securities (MBS) market is stabilizing and lenders are successfully working through their lending pipelines,” said Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “Refinance activity has experienced a volatile four-week period, but did increase 10 percent last week. Refinancing will continue to be beneficial for the many borrowers able to lower their monthly payments during this time of economic distress.”
The MBA also said earlier this month that new rules on mortgage forebearance under the $2.2 Trillion CARES Act, which allow borrowers to delay repayments by as much as a year, triggered a near 2,000% increase in requests over the final two weeks of last month.
Last month, the Fed said it would buy unlimited amounts of Treasury bonds and mortgage-backed securities (MBS) "to support smooth market functioning" amid the coronavirus pandemic and historic selling on Wall Street.
The Fed began buying up to $40 billion of agency MBS, issued by Ginnie Mae (the National Mortgage Association), Freddie Mac (the Federal Home Loan Mortgage Corporation and Fannie Mae (the Federal National Mortgage Association), which make up around two-thirds of the overall mortgage market.
“Purchase applications decreased less than 2% last week – the fifth straight weekly decline. Compared to the first week of March, the purchase index was down around 35%, as the economic downturn and nationwide mitigation practices to slow the spread of COVID-19 have disrupted the spring homebuying season. The purchase market is still expected to rebound, as long as the public health measures to reduce the pandemic’s spread are successful and result in a broader recovery.”