During the last week of July, mortgage rates dropped to lows that were not seen since the beginning part of the month. Although it was not clear whether there was any particular driver behind the drop in rates, the response in the market has been to wait and see whether this drop would continue or spike back up.
During the end of July, a number of lenders posted updated rate sheets that help promise for the market, since several lenders now are quoting out lower interest rates on traditional 30-year mortgages. The lower rates is not the only piece of good news for borrowers, though. Other lenders are posting reduced closing costs. Taken together, these shifts might indicate that the market is becoming a little bit friendlier to borrowers who might have been avoiding moving forward with a home purchase as a result of fear over costs and rates.
Fannie Mae Survey
Even though the data posted above seem to show good news for borrowers, and especially those who were concerned about high rates and closing costs, borrowers are still hesitant about pulling the trigger on a home purchase. In fact, a recent survey by Fannie Mae showed that half of all respondents think mortgage rates will be going up after the conclusion of 2015. In June, however, Fannie Mae’s survey exploring the same issues found that upwards of 35 percent of Americans felt like housing rates could stay the same in the following 12 months. The downside is that only 4 percent of survey takers felt like mortgage rates were likely to improve.
What This Means for the Industry
Lender activity and borrower perception are quite different at this point in time, and it falls on lenders to educate borrowers about dropping or plateaued rates. The misconception that getting a home is very difficult or too costly could be keeping many people out of the market entirely, thus meaning that there is very little turnover in homes up for sale.
The reality is that many current renters are wannabe homeowners, but they may not be aware of all the advantages of owning a home or they may not be clear that they are actually eligible to receive a home loan. Lenders should reconsider how they conduct outreach with potential homeowners to help broaden then reach.
The Fed’s Perspective on Rates
It does not look like rates from the Fed will be raised this fall, especially since most members tend to be leaning towards tightening over the come year. It is expected that many Fed members are waiting to see if the economy fully bounces back before any rate increases are implemented.
Stay tuned each month for a roundup of how things are looking and what you can expect in the market.