: As mortgage rates hover near historic lows, will Americans be able to take advantage of the savings?

United States

Mortgage rates resisted the temptation to move upward after hitting the highest level in months a week ago. But research suggests that many households won’t manage to take advantage of the potential savings the low-rate environment represents.

The 30-year fixed-rate mortgage averaged 2.86% for the week ending Aug. 19, down one basis point from the previous week, Freddie Mac FMCC, -10.50% reported Thursday. A basis point is equivalent to 1% of 1%.

The 15-year fixed-rate mortgage rose a basis point to an average of 2.16%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.43%, falling a basis point from the previous week.

‘Mortgage  rates  were flat this week as investors stood pat, waiting for more signs dictating the economy’s path forward and potential key decisions made by the Federal Reserve.’

— Zillow senior economist Matthew Speakman

“Mortgage rates were flat this week as investors stood pat, waiting for more signs dictating the economy’s path forward and potential key decisions made by the Federal Reserve,” said Zillow Z, -2.26% ZG, -2.35% senior economist Matthew Speakman. Additionally, weaker-than-expected economic reports in recent days, including data on consumer sentiment and retail sales, suggest that rising COVID cases are preventing forward progress on the economic recovery from the pandemic.

That could prompt the Federal Reserve to rethink scaling back their economic stimulus activities. In the minutes from the Fed’s most recent meeting, central bankers were considering tapering asset purchases toward the end of this year. Among the assets that the Fed has been buying are mortgage-backed securities, and housing experts say that the added liquidity those transactions provide to the mortgage market allows lenders to make more loans and lower interest rates to serve more borrowers.

The refinance boom of last year didn’t help all homeowners equally

Whether existing homeowners and prospective home buyers will be able to make the most of this reprieve from rising rates — however long it lasts — remains to be seen.

A report released this week from Bankrate.com found that only 19% of homeowners with a mortgage they had prior to the pandemic have actually refinanced since the COVID-19 crisis began, despite the record-low mortgage rates on offer during that time. And 47% of homeowners haven’t even considered a refinance.

And new mortgage data suggests that people of color are particularly missing out on this opportunity to lock in lower interest on their home loans. The National Community Reinvestment Coalition, a consumer advocacy group, performed an analysis of federal Home Mortgage Disclosure Act data for 2020. They found that the share of refinance loans made to Black and Hispanic homeowners declined last year, suggesting that white and Asian homeowners disproportionately benefited from the refinance boom.

“The refinance boom did little to close the nation’s lingering racial wealth and homeownership gaps,” NCRC president and CEO Jesse Van Tol said in the report.

“The disparity in who benefited from low interest rates also raises questions about the capabilities of both lenders and regulators,” Van Tol added. “Why didn’t they all do more to ensure communities of color reaped equal benefits from record low interest rates?”

The lack of homes for sale means many buyers aren’t actually saving money

Meanwhile, home buyers will be hard-pressed to actually take advantage of low interest rates, thanks to the continued inventory challenges they face. A new economic forecast from Fannie Mae FNMA, -6.10% estimates that home sales will only occur at a seasonally-adjusted annual rate of 6.55 million units in the fourth quarter of 2021, down considerably from the rate of 7.58 million units during the same time in 2020.

“The lack of inventories of homes for sale and continued supply chain bottlenecks experienced by homebuilders remain the primary constraints on home purchase activity,” Fannie Mae deputy chief economist Mark Palim said in the report. “While mortgage rates have drifted downward and in theory provide greater purchasing power to potential borrowers, in practice, given current supply-side and affordability challenges, we expect that benefit to be limited.”