One coronavirus real estate market trend that we have seen this year is low mortgage rates. And now, mortgage rates have managed to hit another record low in 2020.
Mortgage Rates Continue to Fall During COVID-19
The last week of July saw another new low for rates. For a 30-year fixed mortgage, the average interest rate for a contract was 3.14%. This was down from 3.20% the week prior.
At the beginning of August, mortgage rates continued to drop and many experts forecast that rates will either remain at low levels or drop even further. This depends on the developing situation with COVID-19 and its impact on employment trends. The forecaster for the Mortgage Bankers Association (MBA), Joel Kan, commented:
MBA’s forecast calls for rates to remain at these low levels, which will continue to spur strong refinance activity and offer homeowners relief in the form of lower monthly mortgage payments during these uncertain economic times.
Mortgage Rates Fell But So Did Demand From Borrowers
Although rates continue to drop, the MBA reported that mortgage application volume actually dropped last week, down 5.1% from the week prior. Purchase applications fell 2% while refinance applications were down 7%.
At the same time, both purchase and refinance applications were much higher than they were last year. Refinances were up 84% and purchase applications, 22%. This indicates that although there was a drop in demand at the end of July, low rates are clearly pushing buyers and refinancers into the market during COVID-19.
For buyers, COVID-19 is causing them to look for properties for sale with more space, in suburban areas. However, applications may be dropping due to tight inventory across the US housing market. House prices also continued to rise in many areas, despite COVID-19 predictions that they would fall. At the same time, lenders are being strict with both who gets the best rates as well as with low-down payment loans.
For refinancers, many already took advantage of the low mortgage rates COVID-19 introduced into the market earlier this year and so, naturally, demand has dropped somewhat.
What This Means for Real Estate Investors
If you were waiting for mortgage rates to drop even lower this year, now could be a good time to jump on that rental property you’ve been eyeing. Just be sure to analyze it’s potential with financing in mind using Mashvisor’s Cash on Cash Return Calculator.
If you own an investment property and haven’t looked into refinancing yet, consider speaking to your mortgage lender today.
Whichever situation you are in, be sure to shop around to see which mortgage lender can offer you the best rate for your rental property in 2020.
Related: How to Get the Best Rental Property Mortgage Rates in 2020
And if you’re one of the many who are still holding out for even lower mortgage rates, some forecasters offer some hope that this will happen. At the same time, inventory is low. So if you’ve found a great real estate deal, then don’t let it slip by when you can already get it with low rates today.
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