Boston Condos for Sale and Apartments for Rent
What Will Happen with Massachusetts Mortgage Rates this Week?
Mortgage applications rise for second week despite historically high rates
Boston Condo Mortgage Applications on the Rise
Mortgage applications rose for the second week in a row during the week ended May 6, as some homebuyers managed to shrug off rising mortgage rates that have reached their highest level since 2009.
Mortgage applications rose 2% on a seasonally adjusted basis, thanks to strong gains in conventional and government purchase loans, the Mortgage Bankers Association said, citing its Market Composite Index.
The average contract interest rate for conforming 30-year mortgages of $647,200 or less rose to 5.53% from 5.36%, while the rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration increased to 5.37% from 5.27%.
“Despite a slow start to this year’s spring homebuying season, prospective buyers are showing some resiliency to higher rates,” MBA associate vice president of economic and industry forecasting Joel Kan said in a press release.
Kan noted that the share of adjustable-rate mortgages rose to 11% of overall loans and to 19% by dollar volume, as borrowers sought to combat higher rates.
“The rapid rise in mortgage rates continues to hit the refinance market, with activity 70% below a year ago,” Kan added. “Most homeowners refinanced to lower rates in the past two years.”
The refinance index slid 2% from the previous week and was down 72% from the same week a year ago. The refinance share of mortgage activity decreased to 32.4% of total applications from 33.9% the previous week.
The FHA share of total applications slid to 10.5% from 11.1%, while the VA share of total applications rose to 10.5% from 10.3%. The USDA share of total applications rose to 0.5% from 0.4%.
The seasonally adjusted purchase index rose 5% from the previous week, while the unadjusted purchase index gained 5% and was 8% lower than one year ago.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances of more than $647,200 rose to 5.08% from 4.92%, and the average contract interest rate for a 15-year fixed-rate mortgage increased to 4.79% from 4.68%.
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Experts predicted that Boston real estate mortgage rates would fall at the beginning of the coronavirus pandemic, but none could have predicted that rates would drop below 3% for the first time ever.
On July 16, 2020, the 30-year fixed rate mortgage rate hit 2.98% according to Freddie Mac. This is the first time that rates have dropped before 3% since 1971, when Freddie Mac began tracking mortgage rates. It’s also the seventh time so far this year that the organization has reported a record low. On August 6, 2020, experts saw an even more historic drop with rates reaching 2.88%, marking yet another historic low.
This new record low may motivate many more to hit the market. Both renters and current homeowners thinking of making a move can reap the benefits of low rates. Benefits translate to long-term savings for buyers—they may qualify for larger loans, affording an expanding budget for their home search. They can also keep their budget the same and simply enjoy lower monthly mortgage payments.
IF YOU’VE BEEN ON THE FENCE ABOUT BUYING, CONSIDER THE FOLLOWING:
A HOMEOWNER WHO TAKES OUT A $200,000 MORTGAGE AT THE CURRENT 2.88% RATE STANDS TO SAVE $33,304 OVER THE LIFETIME OF THE LOAN AS COMPARED THAT THE SAME HOMEOWNER WHO LOCKED IN THE 3.72% RATE SIX MONTHS AGO.
This is a boon for sellers as well, who will benefit from growing buyer demand and increased budgets of potential buyers. Sellers are finding that lower housing inventory has led to incredible competition for homes on the market. Realtors are reporting frequent competitive offers—including bidding wars—for the most desirable properties. Historically low-interest rates may seem like a benefit to buyers only, but sellers are also reaping the rewards.
Typically, in times of crisis, like the country’s current battle against coronavirus, interest rates will dip. While it may seem counterintuitive, an improvement in the health crisis, like a drop in cases or the promise of a vaccine, rates will likely begin to creep back up. If you have considered buying or selling, current market conditions are favorable to a high return on your real estate investment.
