Mortgage Interest Rates Forecast
April mortgage rates forecast
In March, the trajectory of mortgage rates humbled forecasters.
Mortgage rates fell in late February as the COVID-19 pandemic spread. The forecast for March seemed logical: Mortgage rates would continue falling if the epidemic worsened in the United States.
Instead, mortgage rates went up dramatically in March.
The forecast for April calls for fixed mortgage rates to fall below the levels seen in March, as the Fed restores stability.
The Fed clearly intends to steady mortgage rates. If it succeeds, the 30-year mortgage could settle at around 3.5% or lower through April, giving more homeowners an opportunity to refinance. Low and steady rates would please home buyers, too — those who brave the housing market during an epidemic.
How March departed from the forecast
In NerdWallet’s daily mortgage survey, the 30-year fixed-rate mortgage averaged 3.373% APR on Feb. 28. It moved upward, but lingered below 3.5% for a week and a half. It rose further on March 10, reaching the month’s high of 4.113% on March 20. That was a jump of about three-quarters of a percentage point in just three weeks.
Rates went up during that period because of turbulence in bond markets. Bondholders sold their bonds to stockpile cash. These sales depressed bond prices, including prices for mortgage-backed securities, which pushed mortgage rates higher.
In addition to dealing with a topsy-turvy bond market, mortgage lenders had to get a handle on a gigantic surge of refinance applications in late February and early March after mortgage rates fell dramatically. Most lenders were swamped with as many applications as their staffs could handle. As they reached capacity, they raised rates to temporarily discourage customers.
Fed steadies mortgage rates
The Federal Reserve can’t increase lenders’ capacity to process loan applications, but it does have tools to stop the cycle of falling bond prices. The central bank’s first effort was March 15, when it pledged to buy at least $200 billion in mortgage-backed securities over the coming months. The Fed ended up buying nearly half that allotment in just a week.
Round two began March 23, when the Fed announced that it would spend as much money on mortgage-backed securities as necessary “to support smooth market functioning.”
The Fed has shown that it will buy astonishing quantities of mortgage bonds to bring stability to mortgage rates. It seems like a safe bet that it will succeed. But this has been an unpredictable year. The sell-by date on predictions is short. For rate forecasters, humility is in high demand.
What are the current mortgage rates today?
On Friday, March 27, 2020, the average rate on a 30-year fixed-rate mortgage fell 20 basis points to 3.438%, the average rate on the 15-year fixed-rate mortgage dropped nine basis points to 2.973% and the average rate on the 5/1 ARM went up 16 basis points to 3.818%, according to a NerdWallet survey of mortgage rates published daily by national lenders. A basis point is one one-hundredth of one percent. Rates are expressed as annual percentage rate, or APR. The 30-year fixed-rate mortgage is 68 basis points lower than a week ago.
Mortgage rates this week
The Federal Reserve restored sanity to the mortgage market the morning of March 23, causing a steep drop in mortgage rates. All week, the 30-year fixed-rate mortgage was lower compared with the week before.
In NerdWallet’s daily survey, the 30-year fixed averaged 3.475% the week of March 23-27, down significantly from the average of 3.8% the week before.
Mortgage rates fell because the Fed stepped in before markets opened Monday, March 23. It said it would buy as many Treasurys and mortgage-backed securities as it takes to keep markets functioning.
To emphasize that it meant business, the central bank announced it would buy about $250 billion in mortgage bonds in just the week of March 23. The strategy worked. Fixed mortgage rates tumbled about three-quarters of a percentage point in the first three days of the week, before bouncing higher and lower Thursday and Friday.
The mortgage industry is still working through the chaos of the past few weeks, which featured wild up-and-down swings in mortgage rates, more refinance business than lenders could handle, and havoc in the mortgage bond market.
For now, it’s easier to get an ordinary conforming loan, like a fixed-rate mortgage with a high credit score and a 20% down payment, than it is to get a jumbo mortgage, or a loan with a small down payment or low credit score. With time, as lenders recover after enduring a wild March, all loan types, including jumbos, may become widely available again.
See more at…https://www.nerdwallet.com/blog/mortgages/mortgage-interest-rates-forecast/