Don’t expect interest rates on 30-year mortgages to fall below 3%, says Quicken Loans CEO Jay FarnerMarch 7, 2020
The past few years have been a roller-coaster ride for the mortgage industry, as interest rates have seesawed up and down.
Mortgage rates hit an all-time low this week in the U.S., with the average rate of the 30-year fixed-rate mortgage dropping to a staggering 3.29% according to Freddie Mac, eclipsing the previous low set back in 2012. Just a year ago, though, mortgage rates were hovering in the mid-4% range after almost touching 5% at the end of 2018.
With the ups and downs of mortgage rates have come booms in refinancing activity. This week, Quicken Loans reported the largest single-day volume of mortgage applications in the company’s history.
Quicken Loans is in an enviable position to profit off the latest boom in refinance activity, caused this time by the coronavirus outbreak. Since launching its Rocket Mortgage technology in 2015, the company has focused much of its energy in digitizing the loan process, sparking a trend across the industry. Today, 98% of all home loans originated by Quicken utilize Rocket Mortgage technology at some point in the process, helping the company become the largest mortgage lender in the country back in 2018.
Read more:Mortgage rates fall to all-time low amid coronavirus concerns — here’s why Americans may not take advantage of them
MarketWatch spoke with Quicken Loans CEO Jay Farner to get his perspective on where interest rates are headed now that they have hit fresh lows and what the future holds for the mortgage industry. The following interview was edited for clarity and length.
MarketWatch: What is your take on the situation with mortgage rates right now? Where do you see them headed?
Jay Farner: As you probably know, the 10 year Treasury
, at least last I checked this morning, has remained under 1%, which is a record low. That’s had the same effect on mortgage-backed securities. So 30-year mortgage rates have dropped quite a bit to the low-to-mid 3% range on a 30-year fixed-rate, and we’re now below 3% on a 15-year fixed. So, I’d say for the vast majority of Americans, they’re now in a position where they can save money by refinancing. So they should be doing something.
Interestingly, one of the things we’re talking a lot about is people moving from a 30-year to a lower term, a 20-year or 15-year, because rates are so low, they can get a payment today at a 15-year that is similar to a payment they would have made four or five years ago on 30-year when rates were in the fives, yet they could pay their home off in 15 years for far less interest.
MW: How low do you think mortgage rates will go?
Farner: There’s a supply and demand issue here. We are very fortunate we’ve been spending a lot of money for years investing in technology. We had hired over 1,000 people in the last 12 months because of the normal growth pattern we had set, so we’re taking this volume on nicely. But the…