Mortgage Rates March 2020

What a month for mortgage rates. Due to the pandemic mortgage rates sank to their all time lows in March (first week) and homeowners rushed in to refinance their current mortgage. 30 year fixed rate mortgages were below 3.25% while 15 year fixed rate mortgages dipped below 2.875%. It didn’t last long as the overwhelming amount of loan applications that flooded the market caused significant problems for lenders. To slow the tsunami of applications mortgage lenders started to raise mortgage rates. Some lenders pushed 30 year fixed rates up to the high 4’s and low 5’s.

The Surge of Applications:

I have never seen anything like the last week of February and the first week of March. The surge of applications was significant. It was as if most homeowners around the country had been waiting for years for this moment in time and they all applied at once. On average a good day in the industry pulls in about $1.5 billion in new mortgage loan applications.

During this time the industry was doing $5 - $13 billion a day in mortgage loan orginations. That is insanley high and it has now put lenders in a difficult position. The logistics of processing all these loans is hard as mortgage lenders have only a certain number of employees who were already working overtime.

An additional problem is the funding of these loans. There is only so much money that mortgage lenders have access to and for some lenders they comitted to more loans than they can fund in one month. So now you’re seeing mortgage lenders shut down programs and push funding to April to try and spread out the volume.

What happens next:

Mortgage rates will probably stay elevated for the foresable future. Two things need to happen before we’ll see mortgage rates move lower form thse current levels. First, the bond market volatility needs to end. Mortgage rates hate bond marekt volatility. Second, mortgage lenders need to work through their applications and get pipelines down to a manageable level.