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Coronavirus hysteria has a surprisingly positive side effect
Homeowners are now locking in the lowest interest rates ever
As millions of Americans continue to storm supermarket shelves in wake of coronavirus panic, others are taking a calmer, more measured approach to weathering the storm. The respiratory illness has resulted in a market slide and fears of economic regress. But for United States mortgage brokers, it’s a great time to empower owners and investors.
For the week ending March 5th, 2020, average 30-year fixed-rate mortgages plummeted to their lowest ever, landing at 3.29%*. Such a decrease has prompted savvy borrowers to seriously consider refinancing. And despite the widespread threat of coronavirus, the decision may score them thousands upon thousands of dollars in savings.
It’s been nearly a decade since U.S. homebuyers saw such attractive numbers. Near the end of the last great recession, average mortgage rates dropped to about 3.31% (November 2012). This makes today’s fixed rate of 3.29%* the lowest ever recorded by Freddie Mac. As a result, lenders are reporting a massive influx of applications, with an increase of 1.7 million eligible borrowers in the last week alone.
“Much remains unknown with this virus and its potential impact on human life and economic activity,” said Matthew Speakman, economist at Zillow. “COVID-19 is here, and it will continue to be the main driver of mortgage rate movements in the coming weeks.”
March 2020
3.29% Current 30-year fixed mortgage rate, a decrease of 16 basis points since the end of February
2.79% ** Current 15-year fixed mortgage rate, a decrease of 16 basis points since the end of February
13 million Estimated borrowers who stand to save by refinancing, lowering their rates by an average of 75 points
1.7 million One-week jump in number of potential refinance candidates—a 60% year-to-date increase
$277 Average monthly savings on a 30-year fixed loan (altogether, Americans can save $3.5B)
**Stats reported by MarketWatch and CNBC Real Estate
Experts say roughly 45 million Americans can now access upwards of $6.2 trillion in home equity through a cash-out refinance. With rates so low, the opportunity is incredibly enticing. However, experienced economists agree: it’s hard to say how long the refinancing boom will last.
“Those who are considering refinancing shouldn’t wait on the sidelines, since it’s not guaranteed mortgage rates will drop much further than where they are now,” says Jacob Passy of MarketWatch. “Many lenders have hit their capacity in terms of how many loans they can process.”
Experts also cite worries over potential ‘shelter-in-place’ directives due to the pandemic. If you can’t physically meet with a loan processor, do rates really matter?
House hunting in the age of corona
Individuals looking to buy (as opposed to refinance) face a number of market challenges related and unrelated to COVID-19. Yes, applications are definitely up. But due to historically low interest rates, slow construction activity, and other factors, inventory remains limited. People are finding it difficult to realize such potential savings when there are so few homes to choose from.
Not to mention, experts wonder if today’s low rates have ‘locked’ people into their current homes, discouraging them from selling. If coronavirus has an even greater impact on the U.S. economy and job market, homebuyers may also stall their decisions to sign.
In the last couple of weeks, the infection has seemingly taken hold of every aspect of our lives. From work and school to health and hygiene—coronavirus mania has certainly made its mark. But when it comes to the purchase of a home (and other monumental milestones), people are not so easily swayed.
“These sorts of decisions tend to be shaped by factors more reflective of major events in individuals’ lives such as decisions to retire, have children, down-size, etc.,” says Mark Hamrick, analyst at Bankrate. “It’s a lot different than opting to pick up a pack of chewing gum at the last minute at the checkout counter of the grocery.”
So, while homeowners consider a host of new strategic opportunities, we continue to monitor the outbreak and its impact on the real estate market. In the meantime, reach out while rates are hot. Your Everest family hopes coronavirus has hit its peak—but your financial potential should be contained!
Everest says: spread the word
*Average customer rates and terms subject to change 3.29% APR
**Average customer rates and terms subject to change 2.79% APR