After taking a brief breather from its record-setting run last week, the 30-year fixed-rate mortgage plunged to another new low in Bankrate’s weekly survey.
The 30-year fixed mortgage fell to 3.14 percent, down 10 basis points from a week earlier. Mortgage rates, which are tied to the 10-year Treasury rate, have tumbled during the pandemic as a massive intervention by the Federal Reserve has pushed borrowing rates lower than ever before.
The drop in rates came as a bit of a surprise. The Federal Housing Finance Agency announced last week that refinance loans sold to Fannie Mae and Freddie Mac will incur a new 50 basis-point fee after Sept. 1. This was expected to push up borrowing costs. Instead, the rate for the 30-year fixed refinance stayed the same this week at 3.25 percent, so that rate did not fall with the market.
“While mortgage rates moved to a new record low, the bulk of the move was driven by some previously uncompetitive offers suddenly becoming more competitive,” says Greg McBride, Bankrate’s chief financial analyst.
Dick Lepre, senior loan officer, RPM Mortgage, Inc., San Francisco, says much was written about why the FHFA slapped the new fee on refinances. “Most of what was written said that FHFA’s justification was that refis, even those with no cash out had greater risk. This is a personal message I received from a senior FHFA official: ‘It’s not at all about increased refi risk, it’s about recouping COVID costs. Forbearance isn’t free.'”
As of August 10, 3.9 million homeowners were in active forbearance, representing 7.4 percent of all active mortgages, according to data firm Black Knight.
Meanwhile, mortgage applications dropped 3.3 percent last week and applications for refinances declined 5 percent from the previous week, according to a report from the Mortgage Bankers Association.
Separately, The Commerce Department reported that new construction in July surged 22.6 percent over the revised June estimate.
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