Mortgage rates fall, but purchasers are staying away

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Mortgage rates dropped for the second consecutive week, falling 17 basis points, but that is not attracting homebuyers back into an uncertain market, according to Freddie Mac.

"Mortgage rates have drifted down for two weeks in a row and that drop reflects improvements in market liquidity and sentiment," Sam Khater, Freddie Mac's chief economist, said in a press release. "While the market has stabilized relative to prior weeks, homebuyer demand has declined in response to current economic conditions. The good news is that the pending economic stimulus is on the way and will provide support for both consumers and businesses."

The 30-year fixed-rate mortgage averaged 3.33% for the week ending April 2 down from last week when it averaged 3.5%. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.08%.

The 15-year fixed-rate mortgage averaged 2.82%, down from last week when it averaged 2.92%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.56%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.4% with an average 0.3 point, up from last week when it averaged 3.34%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.66%.

However, Zillow's rate tracker, which is based on the lender offers made on its website, moved higher during the seven-day period ended on April 1, continuing a three-week period of wild rate swings.

"The mortgage market is facing the next phase in what is continuing to evolve into a perfect storm. Aggressive interventions by the Federal Reserve initially helped address some volatility in rates brought upon by underlying strains in the secondary markets for mortgages," according to Zillow economist Matthew Speakman.

"And actions taken by other government agencies offered support to many borrowers who were at risk of missing monthly payments because of COVID-19 impacts. But these well-intentioned measures may have produced new challenges for mortgage lenders and servicers, who now face the prospect of short-term cash shortages due to missed payments and disruption to usually reliable risk hedges. These new constraints have manifested themselves in mortgage rates that remain all over the place on a day-to-day basis and no longer follow their usually rock-solid and largely predictable relationship with Treasury yields," Speakman said in note that accompanied the release of Zillow's own rate tracker.

"Demand for unconventional mortgages — namely jumbo loans — is also drying up on the secondary market. Taken together, it's clear that absent any pointed relief for lenders and servicers, mortgage rates are likely to remain somewhat high and wild swings in rates will continue in the near future."

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