With mortgage rates close to historic lows, are enough Americans using their savings?

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Mortgage rates have resisted the temptation to move higher after hitting their highest level in a few months a week ago. But research shows that many households will fail to take advantage of the potential savings that a low-tariff environment presents.

30-year fixed rate mortgages averaged 2.86% for the week ending Aug 19, down one basis point from the previous week, Freddie Mac
FMCC, St.
-2.08%

reported Thursday. The base point is equivalent to 1% of 1%.

Fixed rate mortgages for 15 years have grown to an average of 2.16%. The Treasury-indexed five-year adjustable rate hybrid mortgage averaged 2.43%, down from the baseline from the previous week.

“Mortgage rates have remained unchanged this week as investors have stood still, awaiting new signs shaping the future of the economy and potential key decisions by the Federal Reserve,” Zillow said.
Z,
-1.28%

ZG,
-1.23%

senior economist Matthew Speakman. In addition, weaker-than-expected economic reports in recent days, including data on consumer sentiment and retail sales, suggest that the rise in COVID cases is hampering ongoing progress in the post-pandemic economic recovery.

This could prompt the Federal Reserve to reconsider its view of cutting back on its stimulus. In the minutes of the last Fed meeting, central banks considered the possibility of cutting asset purchases by the end of this year. Among the assets the Fed is buying are mortgage-backed securities, and housing experts say the additional liquidity these transactions provide in the mortgage market allows lenders to issue more loans and lower interest rates to serve more borrowers.

Last year’s refinancing boom didn’t help all homeowners equally

It remains to be seen whether existing homeowners and prospective home buyers will be able to make the most of this grace period from rate hikes – however long it lasts.

A Bankrate.com report released this week found that only 19% of homeowners with mortgages they had before the pandemic had actually refinanced since the COVID-19 crisis began, despite record low mortgage rates offered in that time. And 47% of homeowners have not even considered refinancing.

And new mortgage data show that people of color especially miss this opportunity to record lower interest rates on their home loans. The National Coalition for Reinvestment, a consumer advocacy group, analyzed data from the 2020 federal housing mortgage disclosure law. They found that the proportion of refinancing loans to black and Hispanic homeowners fell in the past year, indicating a disproportionate benefit to white and Asian homeowners. from the refinancing boom.

“The refinancing boom has done little to close the country’s remaining racial wealth and home ownership gaps,” NCRC President and CEO Jesse Van Tol said in a report.

“The inequality in who benefits from low interest rates also raises questions about the power of both lenders and regulators,” added Van Tol. Why haven’t they all done more to ensure that communities of color benefit equally from record low interest rates?

The lack of homes for sale means that many buyers aren’t actually saving money.

Meanwhile, home buyers will find it difficult to actually take advantage of the low interest rates due to the ongoing inventory problems they face. Fannie Mae’s New Economic Outlook
FNMA,

It is estimated that in the fourth quarter of 2021, home sales will occur at a seasonally adjusted annualized rate of 6.55 million units, well below the 7.58 million units in the same period in 2020.

“Lack of stocks of homes for sale and ongoing supply chain bottlenecks faced by developers remain major constraints to buying activity,” Mark Palim, deputy chief economist at Fannie Mae, said in a report. “While mortgage rates have come down and theoretically provide more purchasing power for potential borrowers, in practice, given the current supply and affordability concerns, we expect this benefit to be limited.”

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