Will Mortgage Rates Go Up or Down? Market Analysis – COVID-19

In our latest analysis “COVID-19: Impact on Real Estate Prices” we mentioned that mortgage rates influence property prices. So, will mortgage rates go up or down ?

1. Coronavirus Makes Mortgage Rates Unpredictable

According to Better Mortgage, a direct lender in the United States, “many homeowners are surprised to find that rates are either higher than expected or changing rapidly from day-to-day.”

Indeed, mortgage rates are evolving quickly, responding to four determining factors:

1. Market volatility
2. Supply and demand
3. Federal Reserve actions
4. Limited lender capacity

Limited lender capacity is quite interesting. According to Better.com, some large lenders are having trouble returning calls for up to 72 hours. Therefore, as a reaction to this huge influx of new applicants, lenders are raising rates, with some lender’s sites quoting up to 4.375%.

2. Are Mortgage rates Going Up or Down?

But mortgage rates are not necessarily going up. Indeed, one day we can read “Mortgage rates have fallen back to recent lows” (CNBC), and the next we hear that “Mortgages aren’t cheaper” (Financial Times).

So, who to believe? What’s the answer? The best analysis I could find out there was published on themortgagereports.com, and explains that although mortgage rates are coming down to record-low levels, we shouldn’t bet on lower rates from here because these times are “wildly unpredictable”.

In France, mortgage rates have gone up to 0.7% in the past weeks (SeLoger)

In Spain, concerns arise regarding the rise of the Euribor (elEconomista)

3. The Domino Effect: Uncertainty Means Risk

Landlords are bracing for a wave of rent defaults all around the world. As rent strikes are happening, we can only understand why there is a domino effect.

1. Unemployment rises
2. Tenants stop paying their rent, and borrowers ask for forbearance
3. This proves to lenders that risk is higher
4. Mortgages rates increase, unless….
5. Government and central banks intervene to mitigate the risk

About 2 million forbearances have already been granted in the past few weeks (CNBC).