A few months ago, no one was predicting that mortgage interest rates would fall below 4 percent. Now that they are at an average 3.9 percent at this writing, lenders are scrambling to keep up with the demand for refinanced mortgages. Some lenders were offering 30-year jumbo mortgages at 3.75 percent, the lowest interest rate since June 2013.
According to Bloomberg Businessweek, mortgage rates are following a slide in 10-year Treasury yields, with investors seeking safe haven amid weaker-than-expected economic news from Europe and China as well as worries about the Ebola virus.
An economist at George Mason University noted that we usually associate lower interest rates with lower volatility. Now we are seeing the opposite.
Home buyers may not have an opportunity to take advantage of the current rate, according to Mark Vitner, senior economist at Wells Fargo Securities. Unless they are just now closing on a mortgage, it will take months for new buyers to find properties and close deals, and by then rates will likely have changed.
Forecasters don't agree on the outlook for the coming months. The Mortgage Bankers Association thinks the average 30-year-fixed mortgage rate will increase to 4.5 percent.
Wells Fargo's Vitner expects borrowing costs to fall for weeks and maybe months. He says the refi boomlet will give a lift to the financial sector.