: Mortgage rates drop to new record low as coronavirus cases climb

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This is the 13th time mortgage rates have fallen to an all-time low in 2020 — the latest indication of the pandemic’s impact on the U.S. housing market.

Americans are eagerly locking in record-low mortgage rates, but the decline in interest rates isn’t actually saving home buyers much money thanks to rising house prices.


Getty Images/iStockphoto

As mortgage rates fall to a record low once again, one thing is clear: It all comes down to the pandemic.

The 30-year fixed-rate mortgage averaged 2.72% for the week ending Nov. 19, down 12 basis points from the week prior, Freddie Mac
FMCC,
+1.64%

 reported Thursday. The 30-year’s rate is nearly a full percentage point below where rates were a year ago. During this same time in 2019, these loans had an average rate of 3.66%.

The 15-year fixed-rate mortgage fell six
basis points to an average of 2.28%, while the 5-year Treasury-indexed hybrid
adjustable-rate mortgage dropped by 26 basis points to 2.85%.

Disappointing reports on the state of the
nation’s economy contributed to the downward path rates took over the past
week.

“Weaker consumer spending data, which accounts for the majority
of economic growth, drove mortgage rates to a new record low,” Sam Khater, Freddie Mac’s
chief economist, said in the report, adding that nevertheless “strong housing
demand continues to have a domino effect on many other segments of the
economy.”

Mortgage rates roughly track the direction of long-term bond yields, including the 10-year Treasury note
TMUBMUSD10Y,
0.854%
.
Bond yields have been on a rollercoaster ride in recent weeks. Positive developments regarding multiple coronavirus vaccine candidates, including those from Pfizer
PFE,
-0.72%

and Moderna
MRNA,
+5.55%
,
sparked optimism among investors about an economic recovery. At the same time, the nation continues to see record numbers of COVID-19 cases and rising deaths, a sign that the pandemic is getting worse before it gets better.

Meanwhile, Americans’ feverish appetite for homes has quickly
dwindled the supply of available listings, driving prices higher. As a result,
record-low mortgage rates don’t really translate into huge savings as much as
they once did.

“The steep rise in home prices is diminishing
the benefit of lower mortgage rates,” said George Ratiu, senior economist at Realtor.com.
“For today’s buyers, the current rate combined with
higher prices translates into a savings of only $4 per month on a mortgage payment.”

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