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Although the pandemic has affected nearly every industry, the real estate industry has seen a particularly dramatic shift when it comes to mortgage rates. With its widespread economic impact, COVID-19 has not only affected mortgage rates, but also heightened requirements for purchasing a home loan in some markets.
In this article, we want to take a deep dive into how exactly the pandemic has caused a shift in mortgage rates, and what it means for you moving forward into 2021.
So how exactly did this happen? Well, average mortgage rates in the United States loosely follow a yield on the 10-year treasury; a debt obligation issued by our government. This treasury matures every 10 years, and it’s a part of how the government funds itself. When retail sales drastically decreased, investors were forced to refocus their attention on the bond market in an effort to protect their money. This led to a drop in mortgage rates — in fact, the lowest we’ve seen in more than a decade.
This decrease in mortgage rates sparked interest in buyers. Why not take advantage of these great deals right? Unfortunately, it’s not that cut and dry. With nearly 5 million mortgage borrowers in forbearance, lenders have been hesitant to extend credit on new mortgages or refinance current ones. So while this situation may have benefited buyers, it certainly has not benefited lenders. This leads us to our next point…
With so many mortgages in forbearance and unemployment rates skyrocketing, home loan lenders have stiffened up their buying criteria needed to qualify for a mortgage. Lenders everyone are feeling the high risk of issuing loans in such an unstable economy, and rightfully so. The Mortgage Bankers Association stated that there has been a 25% decrease in mortgage credit available as a result of the pandemic. So although mortgage rates are low, it can be harder to get approved for a home loan, depending on the lender you’re in talks with.
Spring is typically the most popular time of the year for buying or selling a home. But as you recall, this is when the pandemic hit in full swing. Fewer homes were listed for sale, as fewer buyers were shopping due to unemployment concerns. Many homeowners pulled their home from the market for fear of price drops and unwanted strangers walking through their homes; and home buyers haven’t been shopping for the same reasons. With less homes on the market, home buyers are hesitant to buy knowing their dream home could arise once this is all over.
If you’re weary of selling or purchasing a home in 2021, our best recommendation is to seek advice from a lender. And Ken Venick can do just that!
We have over 30 years of experience in the real estate industry, and know all the ins and outs of how to navigate these uncertain times. We are licensed in Maryland, Delaware, Washington DC, Pennsylvania, New Jersey, North Carolina, and Florida. Visit our FAQ page to learn more about our services, and contact us today!
The post The Impact of Covid-19 on Mortgage Rates appeared first on Owings Mills & Lutherville Mortgage.
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