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Why Record-Low Mortgage Rates Could Keep Falling


According to a recent post published by  the experts at Bankrate, mortgage rates are set to decline even further as fall approaches. Currently, borrowers have been blessed with record low mortgage rates (in September, the typical 30-year mortgage was hovering at just 3.10%), and it looks like they may have even more cause to celebrate within the coming months.

Never certain exactly what the future holds, the following six factors lead experts to believe that interest rates will fall even further come fall:

Increase in Bank Deposits

Interest rates are a direct reflection of what is happening with supply and demand. Currently, the supply of capital far surpasses borrower demand, resulting in exceptional mortgage financing. In this environment, would-be borrowers with great credit, low monthly debt, and 20% equity (or greater) can avail themselves of financing at an incredible 3% or less rate.

Regarding supply, all signs point to low rates as the year progresses. According to the Federal Deposit Insurance Corp., bank deposits (read: supply) rose by more than $1 trillion in the first and second quarters of 2020.

Decrease in Consumer Debt

Amid the current pandemic, people are trending toward being more cautious with their finances, and saving versus spending. As well as saving more, people are also looking to pay off their credit cards, home equity lines of credit, and other debts. Common sense says the less debt that people owe, the less they will borrow (less demand for lenders’ financing).

Those In Forbearance Continue to Fork Over Payments

There are currently an estimated 3.6 million mortgages in forbearance, according to the Mortgage Bankers Association. Although this means that lenders are allowing lenience to borrowers to skip some or all of their monthly payments temporarily, many of these borrowers are actually not taking them up on that pass. Instead, a large number of borrowers are continuing to pay, not missing even one regularly scheduled payment. Specifically, the Urban Institute reported an estimated 1 million borrowers currently in forbearance are still keeping up with their payments.

Adverse Market Refinance Fee On Hold

Federal regulators announced in August that Fannie Mae and Freddie Mac would begin charging a 0.5% adverse market refinance fee starting in September. This news resulted in an immediate spike in mortgage rates. Purchase money rates also experienced an uptick (rising 11%). Even though this new fee didn’t directly apply to such loans, it caused many rates to inch upward.

The fee has now been delayed by the Federal Housing Finance Agency until Dec. 1. The fee may also now only apply to mortgages over $125,000. This is an important factor because it means that lenders will no longer have an additional cost (a raised rate) to hoist onto borrowers (at least until Dec. 1, if the fee is even enacted then).

Cash Remains King

Cash is everywhere in 2020, as low rates are not just an American occurrence, but are being enjoyed worldwide. Bottom line here: more money is means more supply.

Federal Deficit Multiplying

Let’s face it: federal debt is dismal. Not only have we been saddled with the usual deficit spending, but we have also had the extra burden of costs expended in an attempt to keep the depression directly resulting from the current pandemic at bay. This includes stipend checks issues by the government, the PPP program, and more. These conditions are primed for the introduction of new federal policies that welcome more cash and lower rates in hopes of keeping federal interest spending in check.

by Andy Beth Miller (via

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