Mortgage Rates Fall to Three Month Low

January 24, 2020
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United States mortgage rates slid to a three-month low this week, reflecting the Federal Reserve’s low interest rate, which is expected to persist throughout 2020.

This creates an opportunity for buyers and sellers, and even lenders will be able to benefit from some of the action. Here are all of the important details surrounding this latest news.

Low Mortgage Rates Reported by Freddie Mac

The Federal Home Loan Mortgage Corporation, widely known as Freddie Mac, reported that mortgage rates averaged at a three-month low for the weekly period that ended on January 23.

  • The 30-year fixed mortgage rate sat at an average of 3.6%, down by five basis points when compared to the previous week.
  • The 15-year fixed mortgage rate was also down, averaging 3.04%.
  • Adjustable-rate mortgages were down, with the 5/1 mortgage falling 11 basis points to an average of 3.28%.

Rates haven’t been this low since October, and this could lead to more buyers entering the home market.

Impact on the Markets

Some analysts see lower rates as being both beneficial and detrimental to home buyers. From one perspective, home buying power increases as more individuals and families are able to engage with the market. Borrowing becomes more attractive, especially in the case of fixed-rate mortgages.

However, there are financial analysts who believe that low rates will only have a minor impact on the markets. Existing homeowners are likely to have purchased their homes when rates were low during the previous recession. Others would have refinanced during this time, to take advantage of lower rates.

Existing homeowners have little incentive to move from their homes, which could lead to some stagnation and a shortage of inventory. This could push prices upwards, which would leave new buyers with fewer options, despite having access to affordable mortgages.

The National Association of Realtors announced in December that the supply of homes was at a 20 year low.

Who is Likely to Benefit?

Even with lower inventory, there are still bargains in the market today. New buyers, especially at the low end of the market, can find opportunities, and with lower interest rates, repayments will be more affordable.

Current homeowners who are looking to sell could see low inventory as an opportunity. A listed home will be more competitive in a constrained market, and this could allow for a slightly higher sale price or a faster turnaround.

Investors with holdings in banks and lending companies will also benefit. More activity will boost revenue from loan income. This could lead to stock price growth.

Despite some slowdown in economic growth, 2020 should still present opportunities for home buyers and sellers.

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