Low rates are great for builders—for lenders, however, not so much. Not only do they lead to less return for the companies after people rush to lock in lower rates, the sheer volume of applications is overwhelming employees. Some lenders have even stopped taking applications while others have wait times that can drag on for hours. In turn, this pressure on the lending market is actually keeping the rates from dropping further as lower rates mean more risk for investors.
A sharp drop in mortgage interest rates has sparked a sudden and unexpected refinance boom that has lenders large and small scrambling to handle the volume.
That stress on the lending market, as well as increased risk to mortgage investors from all those refinances, is actually keeping mortgage rates higher than they could be.
The average rate on the 30-year fixed loosely tracks the yield on the 10-year U.S. Treasury bond, but it is no longer keeping up. The 10-year plummeted to yet another record low overnight, but mortgage rates, while also at a record low, are slower to fall.
