What an interesting week with both stock and bond market! The stock market started early this week with 2000 points increase and dropped over 7% on Thursday. Jerome Powell, Chair of Federal Reserve, warned that the economy will take much longer time to recover due to the pandemic. The investors cooled their optimism after the announcement.
The housing market is slowly healing on the buyer’s side, with a recovery that’s much faster than anticipated due to low mortgage rates contributing to homebuyer demand.
Historically low mortgage rates persist, and as investors shifted their support to the relative safety of the bond market, the yields have been yet again driven down. The current rates are at around 3% for the 30-year mortgage, having even been recorded at as low as 2.5% for borrowers with great credit and stable income.
On the negative side, in line with the current situation, the nation is nearing 5 million borrowers in mortgage forbearance programs. While the forbearance program is a lifeline to some be careful of asking for one if you do not need it. Lenders are viewing these forbearance requests as an indication of income instability, which will hurt your chances of getting the best rate or even approved for a refinance or purchase until the job market is in recovery.
Mortgage delinquencies have spiked during April, with an increase of nearly five hundred thousand in federally backed mortgages. For a concrete example, mortgages backed by Ginnie Mae, which includes FHA and VA loans, faced an increase of 466,260 delinquencies from March to April. This is most likely an overestimate of the overall mortgage market, because borrowers using FHA or VA loans tend to have lower credit scores overall.