The Virus and Mortgage Rates

So is it time we all start wearing face masks when we go outside? It s seems like every news agency is reporting that the Coronavirus is spreading like wild fire and hundreds of thousands of people could be infected by the time February rolls around.

I started thinking about what are the implications for consumer mortgage rates. Is this a good thing for mortgage rates or a bad thing? If this were to spread like wild fire it could have a short term positive impact on mortgage rates. The problem is this; with mortgage rates already at multi year lows there really isn’t much room for mortgage rates to move lower.

Also most lenders very things like this as temporary and once the “crisis” is over you’ll see rates snap back quickly. It happens all the time so if you are looking to lock in something don’t get too greedy. The worse thing is to wake up one morning and see mortgage rates have moved a .25% higher because scientist believe the virus is contained.

Also most lenders offer a float down on locked rates so if you lock in and rates tank you’re protected. The lender will work with you on lowering your locked terms to bring you more in line with the market.

Long Term Is Better:

Right now longer term rates (30 year and 20 year fixed rates) are more attractive than shorter terms rates (15 year and 10 year fixed rates). It has to do with the current market environment. That being said all four of those terms are more attractive than adjustable rate mortgages right now.

In fact most 30 year fixed rates are lower than 5/1 and 7/1 ARM loans. That’s surprising to most in the industry and it will probably continue.