Pfizer’s COVID vaccine & your mortgage rate

by Martin Santiago, Broker-Associate

ON Nov. 9, Pfizer announced that early clinical trial data on the coronavirus vaccine it’s developing with German partner BioNTech shows that its cocktail is more than 90% effective. Now to be clear, the vaccine trial is by no means over. But the news is encouraging nonetheless. Pfizer’s vaccine candidate is taking a similar approach as some of the vaccines being developed by other companies, meaning that other vaccine candidates could hold similar promise.

Of course, it’s important to take Pfizer’s vaccine announcement with a grain of salt. While the company has lots to lose by inflating claims of efficacy in human trials, its data has not yet been subject to peer review, and so it’s too soon to celebrate the arrival of an effective vaccine. Furthermore, there’s still a vaccine approval process all candidates will have to go through before doses can be mass-produced and distributed to the public.

Stocks surged to all-time highs and bonds (which dictate rates) lost ground at the fastest pace in months. The average mortgage lender raised rates by at least as much as they did last Tuesday, thus erasing a majority of the improvement seen since then.

Back at the start of the pandemic, most economists and mortgage industry experts didn’t expect rates to drop below 3%, but that’s just what happened. In the near-term, mortgage rates are likely to stay low — though they may rise above the record lows they have hit in recent weeks. That’s because the Federal Reserve has indicated that it doesn’t plan to hike rates soon. In time though, a vaccine would naturally cause rates to rise. “It should push overall interest rates up because it improves prospects for economic growth,
After falling to another record low last week — the 12th record low of this year — mortgage rates rose this week in response to the federal election results and promising developments regarding a coronavirus vaccine. Mortgage rates roughly follow the direction of bond yields, so they moved higher, too. The movement was a stark reminder of the influence the coronavirus and our ability to contain it.

The 30-year fixed-rate mortgage averaged 2.84% for the week ending Nov. 12, rising six basis points from the record low set just the week prior, Freddie Mac FMCC, +1.76% reported Thursday. Nevertheless, the average rate stands nearly a full percentage point below where rates were a year ago. During this same time in 2019, these loans had an average rate of 3.75%.

The 15-year fixed-rate mortgage meanwhile rose two basis points to an average of 2.34%, while the 5-year Treasury-indexed hybrid adjustable-rate mortgage jumped 22 basis points to 3.11% on average.

As life returns to normal — or something close to it — people will start going to restaurants, going shopping, taking vacations and all the other activities that stimulate the nation’s economy. That improved outlook would then be reflected in higher yields on Treasury notes and other long-term bonds, which would in turn give lift to mortgage rates.

Economists and mortgage industry experts said they generally expect mortgage rates to remain low, at least by historical standards, in the near-term. While news like the vaccine announcement may push rates up or down a bit from week-to-week, rates won’t move higher in earnest until it’s clear the Federal Reserve is planning to adjust interest rates higher.

But even if rates are higher, most observers expect the housing market to remain strong.

While low rates have provided some support for increasing demand among home buyers, demographic factors and changing preferences in response to the pandemic will continue to stoke home sales in the months to come.

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Martin Santiago is a broker associate at Compass Beverly Hills, a full service residential brokerage firm. The information presented in this article is for general information only and is not, nor intended to be a formal legal advice nor the formation of a broker-client relationship. Call or email Martin at (213)788-8300 &

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