Mortgage rates have fallen to their lowest rates in modern U.S. history this past week due to the fears that the coronavirus is weakening the U.S. economy. Usually, lowering mortgage rates stimulates home sales. However, with “breaking news” daily reporting a worsening coronavirus epidemic may ultimately lead to home buyers staying at home rather than actively going out to look at houses.
Even more, if the virus adversely affects the economy like in China, U.S. workers will start losing their paychecks and their ability to make big purchases. Further, factory supplies from China used by home builders have been disrupted which is an issue in a market that is short in supply according to Realtor.com senior economist George Ratiu.
The outbreak has already caused havoc with entire cities in Asia and Europe shut down as well as flights grounded, and events cancelled here at home. The Organization for Economic Cooperation and Development said that global growth could be cut in half. Prior to the outbreak the economy was growing at an annual rate of only 2%. Now, a recession is brewing as we stop going to restaurants, movies, and concerts.
With less revenue and spending, companies will then start laying off employees. Then, others afraid that their jobs may be next do not spend. That becomes a vicious cycle of more layoffs due to a lack of consumer spending pushing in turn companies going bankrupt.
So, is there a silver lining in all of this?
The bottom line is: if you wish to stay in your current home and refinance or buy a new home, now is the time. It is estimated that 14.5 million homeowners would benefit from the refinancing if the rates drop to 3.25% according to the data firm Black Knight. Currently, the average rate of a 30-year fixed loan fell to 3.29%. Some people are taking advantage of the falling interest rates to refinance and/or to buy. While naysayers forecast that the economy is going to continue to decline and employment may be at issue across multiple sectors, refinancing now may be wise.
The increased refinancing demand, up more than 200% from last year, has posed challenges to some lenders resulting in pausing email refinancing marketing campaigns due to high refinance application numbers. The refinancing frenzy has pushed mortgage lending to its highest levels since 2006—just before the Great Recession.
So, take advantage of these low interest rates and refinance now! Delaying may be at your own peril if the economy continues to spiral down. And, remember, we are here to assist you.