With the economic outlook brightening, mortgage rates are widely expected to rebound from their record lows. Instead, rates fell again this week, reaching yet another record low, according to a Bankrate survey released Wednesday.
The average cost of a 30-year fixed-rate mortgage dropped to 2.96 percent from last week’s 2.99 percent in Bankrate’s national survey of lenders. The 15-year fixed rose ever so slightly, climbing to 2.4 percent. Bankrate includes origination points and other fees in its figure. The 30-year fixed-rate loans in this week’s survey included an average total of 0.31 discount and origination points.
Mortgage rates have been in steady decline since the coronavirus recession began earlier this year, a trend that has helped drive the surprisingly strong housing market. However, rates ticked up a bit last month and stocks soared on optimism about the presidential election, potential vaccines for the coronavirus and an improving labor market.
The recent drop in mortgage rates reflects mixed signals from the economy. An autumn spike in coronavirus cases undermined hopeful signs that a COVID-19 vaccine soon will be available, and the economic recovery so far has been uneven and incomplete.
Michael Fratantoni, chief economist at the Mortgage Bankers Association, says mortgage rates will start rising soon. For now, he calls the disconnect between the economic outlook and mortgage rates “very counterintuitive.”
Some 46 percent of mortgage experts polled by Bankrate expect rates to remain the same in the coming week, while 46 percent expect rates to remain the same.
“Our expectations are for slightly higher rates given the prospect of a new stimulus deal and rising 10-year yields,” says Ralph McLaughlin, chief economist at financial technology firm Haus.com.
The 10-year Treasury yield, a key indicator for mortgage rates, flirted with 1 percent last month but was at 0.92 percent as of Wednesday.