Mortgage rates dipped this week, averaging 3.43 percent for a 30-year, fixed-rate loan, down from 3.45 percent. At this time last year, rates averaged 3.93 percent, according to Freddie Mac.
Rates have held below 4 percent for 33 weeks, the second-longest run of cheap borrowing the U.S. has ever had. The record was set from March 2012 to June 2013, when the cost of a 30-year loan held below 4 percent for 65 weeks.
That’s great news — for people who can get a loan. The reality is that many borrowers can’t qualify for a home loan at all, much less get approved at rock-bottom rates, which are reserved for buyers with pristine credit and big downpayments.
Even though the credit collapse is well behind us, there’s no sign lenders are loosening up, either. Last month, the average credit score on a new mortgage was 727, the highest since June 2015, according to Ellie Mae. By comparison, the average consumer has a credit score of 699, according to Experian, which issues FICO scores.
An April survey by Experian found that 45 percent of homebuyers were delaying a purchase while they improved their credit profile. Thirty-four percent feared their credit score would prevent them from buying.
In short, too many credit-worthy consumers are being turned away from homeownership, which remains one of the best tools for building wealth and financial security. Data from ComplianceTech shows that black Americans, for example, are less likely than whites to get approved for conventional, low-cost mortgages.
On the plus side, this low-rate environment probably will stick around for a while, even though job growth and strong consumer spending has traders betting the Federal Reserve will raise its own short-term interest rates this year, possibly in December.
The Fed doesn’t control the cost of home loans, but it can affect them. In 2013, rates shot up after Fed Chairman Ben Bernanke hinted that the Fed would buy less mortgage debt. His remarks sent financial markets into a “taper tantrum” that pushed interest rates up and threw housing off course.
That’s not likely to happen this time. The Fed is cautious and global economic woes have made investors cautious, too. That has the effect of keeping mortgages cheap, which is welcome news for homebuyers and sellers.