Fixed and variable rates are now veering towards near-record lows
Mortgage rates fell for the fourth consecutive month in September to reach near-record lows, according to online brokerage nesto Inc.
“With only 4 rate changes per month for both August and September 2020, lenders have landed on their desired spread between cost of funds and profit margins,” nesto said in its latest user survey. “The lending industry, as expected, is stimulating the real estate market predominantly with these record-low interest rates… Despite the general uncertainty, new purchase volume is steadily increasing amongst our digital users in the last 2 months, as opposed to renewal volume which has remained steady since June 2020.”
September also saw a slimmer divergence between fixed and variable-rate products.
“Fixed and variable rates for the same category (insured or insurable) are trending closer and closer to each other every month, with only a 0.04% difference between them today,” nesto said. “Since January, rates have changed by 1.05% to 1.2% (the highest insurable variable rate was at 2.95% while the lowest was at 1.75%, a 1.2% difference.)”
Those who took variable-rate loans in January are among the winners in the current environment.
“Taking a mortgage at 1.2%, January 2020’s lowest variable rate, would have ended up saving you $3,613 on a 5-year term,” nesto said.
And in a continuation of trends observed in a previous report, “refinances are gaining ground again in September to reach over 17% of user requests,” nesto said. “The overall purchase inquiry volume seems to have finally slowed down. Not surprising, as year-over-year data indicates the end of Q3 being the end of the ‘home buying season’, but we did expect abnormalities due to the pent-up demand caused by confinement.”
