The drop in mortgage rates below 4 percent has cut into Debra Shultz’s sleep. The New York City banker is busier than she’s been in months, working with three dozen homeowners eager to lower their payments.
Shultz helped a Greenwich Village homeowner on Wednesday lock in a 3.63 percent interest rate for a 30-year fixed jumbo mortgage of more than $900,000. An hour later, the rate jumped to 3.75 percent. One lender changed its rate sheet six times that day.
“It just went crazy,” said Shultz, a senior vice president of mortgage lending at Guaranteed Rate in New York. “I sent out a blast e-mail to 1,600 clients and had 30 responses right away.”
Mortgage rates are following a slide in 10-year Treasury yields as weaker-than-expected economic data from Germany to China combine with concern about the Ebola virus, sparking demand for safe investments. The average rate for a 30-year fixed mortgage dropped to 3.97 percent, the lowest since June 2013, Freddie Mac said yesterday. Borrowing costs spiked in September before dropping for the last four weeks, giving owners a new opportunity to refinance.
“This is bizarro world,” said Anthony B. Sanders, an economics professor at George Mason University in Fairfax, Virginia. “Usually we associate lower interest rates with lower volatility. Now you’re seeing the opposite.”
A gauge of U.S. mortgage refinancing jumped 10.6 percent last week, the most since early June, the Mortgage Bankers Association said Wednesday. The share of home-loan applicants seeking to refinance climbed to 58.9 percent, the highest since mid-February, from 56.4 percent, the group said. In December of 2012, after the 30-year average rate hit a record low of 3.31 percent in November, borrowers wanting to refinance accounted for 84 percent of applications.
Housing sales, which have declined from a year ago, won’t get much of a boost from a short-term drop in rates, said Mark Vitner, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. It typically takes months for buyers to find properties and close deals, and by then rates likely will have changed.