What Will Happen to Interest Rates in 2020 for Boston Home Buyers?

NextHome Titletown Real Estate Boston MA CoronavirusThis is certainly a time of uncertainty as both personal and economic life have suffered major upheavals because of coronavirus and the resulting layoffs, furloughs, and financial uncertainty. But a few things remain pretty certain throughout all this:

  • The stock market is as volatile as ever with its recent dramatic fall.
  • Interest rates look to remain low, which is good news for home buyers, of course.
But what, exactly, will happen to interest rates in 2020 for [market-city] home buyers?

Early 2020 Drop in Interest Rates

In February, the Fed cut interest rates in response to the, at the time, emerging coronavirus situation in an effort to prop up the economy. And then in March, the Fed cut rates again, bringing them to near historic lows. And the forecast for April seems to be that mortgage rates will fall below or remain consistent with March levels.  As of this writing, most banks are offering 30-year mortgages around 3.5% (+/- 0.5% based on credit score or financing volume).

Early 2020 Interest Rates Climate

Here’s how things looked early this year with respect to interest rates: The “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.”

That rise in rates was mostly attributable to upheaval in the bond market and lenders having to deal with late February’s surge in refinance applications. Raising mortgage rates gave them a way to slow applications in order to handle the influx already on their hands.

Current Interest Rates in 2020

But now interest rates in 2020 are lower. The Fed cut interest rates again in March, and that cut is now reflected in mortgage interest rates.

On Friday, April 3, the average rate on a 30-year fixed-rate mortgage fell 17 basis points to 3.43%, the average rate on the 15-year fixed-rate mortgage fell 21 basis points to 2.94% and the average rate on the 5/1 ARM dropped five basis points to 3.52%. (One basis point = one one-hundredth of one percent – 0.01%). The 30-year fixed-rate mortgage is one basis point lower than a week ago and 90 basis points lower than a year ago, continued good news for borrowers and home seekers.

Right now, the rate for a 30-year fixed-rate mortgage is averaging right around 3.5%, which is uncommonly low. As a result, despite rising unemployment and economic uncertainty, many people are applying for mortgages or refinancing their current properties, because it’s a great time to buy with Boston interest rates so low.

Buyers should take into account, though, that rates remain volatile, even at this low level.  The reasons for this include:

  • Huge continued jumps in unemployment
  • School and business closures
  • Consistent increases in mortgage and refinance applications
  • Reluctance among lenders to buy jumbo mortgages

Applyingfor a mortgage requires persistence and patience, especially in this current climate, because rates jump around, making it important to check lenders’ rates daily or even more than once a day. Working with a mortgage broker might be a good idea, as your broker could spend time comparison shopping because of the variation in rates among lenders.

Interest Rates in 2020 Going Forward for Boston Home Buyers

Although interest rates are currently low, they have, nevertheless, pretty much been on a roller coaster without much predictability. So what lies ahead for Boston home buyers?

We know that at the end of Q1 2020, when rates hit new lows, lenders became overwhelmed, and they responded in a relatively uncommon fashion – by raising mortgage rates for their mortgage products. So the Fed took countermeasures. “In response, the Federal Reserve has employed quantitative easing, or QE, by injecting billions into the Mortgage-Baked Security (MBS) market, to ensure that mortgage rates stay low. The Fed has written a blank check, promising to buy billions in agency MBS, which come from Ginnie Mae, Fannie Mae and Freddie Mac. Experts say this move will help put mortgage rates back into balance, helping to push them into the low 3 percent range during Q2.”

In addition, because the Federal Open Market Committee has implemented policies to “ensure the continuation of economic activity and market liquidity, mortgage rates are likely to reach new lows in the coming weeks and months.”  Financial markets are suffering stress and the economic outlook remains uncertain, but market watchers say, we should expect rates on 30-year fixed-rate mortgages to hover around 3% or fall lower throughout the rest of 2020.

Now’s the Time to Buy

If you’re a potential Boston.


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