While lower rates usually boost the market, affordability issues are still weighing heavily on the housing sector, the ratings agency says
Lower mortgage rates may not be the spur to the housing market that they usually are, according to a new analysis by Fitch Ratings.
While lower rates usually spur housing-market activity, Fitch said in a report that affordability issues are still weighing heavily on the market, driven by continued home-price appreciation and exacerbated by tariff considerations. Fitch predicted that lower mortgage rates, while they would not “meaningfully spur” the housing market, should “continue to stabilize the market” following a “sluggish” second half of 2018 and first quarter of 2019.
When it comes to lower rates acting as a significant booster for the market, however, don’t hold your breath. While rates are low, Fitch said, they’re hardly at historic levels.
“Lower interest rates historically have ushered in higher levels of fee income form mortgage originations for banks, both in purchase and refinancing activity,” Fitch said in its report. “However, from a practical standpoint, banks may not be staffed for a surge in refi activity, as the industry was until recently expecting higher rates. … However, current mortgage rates at 3.55% are about 100 bps lower than the average seen in 2018, (but) are not meaningfully lower than the rates seen in 2017, and are still higher than the lows of 2016.”
“The 30-year mortgage hasn’t moved very much despite the volatility of the 10-year (Treasury bond), and many households that would be considering refinancing may have done so over the past few years,” Fitch said.
