Mortgage rates are low on a new record – but not all Americans will be able to reach them


Mortgage rates have decreased for the ninth time in 2020. But black Americans may face an uphill battle to access this historically cheap domestic financing.

The 30-year fixed-rate mortgage ended 2.86% for the week on average. Falling 13 basis points from the week before September 10, Freddie Mac FMCC
-0.48%
Reported on Thursday. The previous record was set at 2.88% in early August. In comparison, the average rate of these loans was 3.56% from a year earlier.

The 15-year fixed-rate mortgage decreased five basis points to an average of 2.37%, while the 5-year Treasury-Index hybrid adjustable-rate mortgage rose 18 basis points to 3.11% on an average basis.

Fred Knot chief economist Sam Khater said the 30-year mortgage decline was a reflection of “a late-summer downturn in the economic recovery”. The stock market was also affected by the higher fall week that lenders were offering.

George Ratiou, senior economist at Realtor.com, said, “The 30-year fixed mortgage rate has declined due to a steep decline in investors in the equity market and away from the relative safety of bonds.”

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But many Americans will not be offered these rock-bottom rates – especially people of color. A recent Laddingtree study found that black home buyers are more likely to get high-cost mortgages to buy a home than the overall population.

High-cost mortgages are loans with an annual percentage rate (APR) compared to the benchmark average prime offer rate defined by the Federal Financial Institutions Examination Council. Black buyers receiving high-cost home loans accounted for nearly nine percent of the total population, LendingTree TREE,
+ 1.71%
Based on analysis of the Home Mortgage Disclosure Act data found.

However, all real estate is local, and in some parts of the country black Americans are more likely to be presented with higher-cost loans. In Cleveland, one in four (26.6%) black home buyers excluded high-cost mortgages, while buyers with high-cost loans accounted for just 9.5% of the total. This indicates a difference of 17 percentage points.

LendingTree’s findings match that other researchers have reported discrepancies of people with colored faces when taking out a home loan. Realtor.com recently reported that homebuyers in predominantly black communities were issued mortgages with interest rates that were 13 basis points higher than in white neighborhoods. And a recent analysis of home mortgage disclosure data from Zillow ZG,
+ 2.65%
It was found that black mortgage applicants were denied loans at an 80% higher rate than white applicants.

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To be sure, these discrepancies are not necessarily indicative of clear racial bias on lending authorities and portions of banks. Rather, it is a reflection of how people of color in America are often at an economic disadvantage.

Black Americans are likely to have lower credit scores or have thinner credit files than their white peers, who may refuse to offer a mortgage company a higher rate or give them a lump sum loan. In addition, racial differences in earnings make it harder for people of color to accumulate the savings needed to make large down payments, which may reduce the interest rate assigned to them.

“Not all consumers can take advantage of low rates”, Landtree’s chief economist, Tendai Kapfitz, wrote in a credit comparison website report. “Depending on factors such as their income, employment history and credit score, the rate some borrowers receive may be significantly higher than the record lows.”

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