Mortgage rates fall to 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.



A man and a woman sit at a table using a laptop computer: Home buyers in predominantly black communities are issued mortgages with a higher interest rate on average than in white neighborhoods.


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Homebuyers in predominantly black communities are issued mortgages with higher interest rates on average than white neighborhoods.


Freddie Mac (FMCC) reported on Thursday that the 30-year fixed-rate mortgage ended 2.86% for the week, ending September 10, falling 13 basis points from the week. 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.

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The 15-year fixed-rate mortgage decreased by 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.

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

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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 purchase a home than the overall population.

High-cost mortgages are loans with an annual percentage rate (APR) higher than the benchmark average prime offer rate defined by the Federal Financial Institutions Examination Council. The share of black buyers receiving high-cost home loans was nearly nine percent higher than the total population, based on an analysis of data from the LendingTree (TREE) Home Mortgage Disclosure Act.

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.

Laddingtree’s findings match that other researchers have reported discrepancies of people in color 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) 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 the fact that 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 loan them outright. In addition, racial differences in earnings make it harder for people of color to accumulate the savings needed to make a large down payment, which may reduce the interest rate assigned to them.

“Not all consumers can take advantage of lower rates”, Tendry Kapfidze, chief economist at Laundry, 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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