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Epic mortgage rates plummet to new low, offering more savings to homeowners and homebuyers
The U.S. coronavirus numbers keep looking worse. More than a million new people sign up for unemployment every week. Congress can't get its act together on more relief for Americans.
The news stinks. But for homebuyers and homeowners, there's a bright side to all that gloom: It has helped slam mortgage rates down to a new record low for the eighth time this year, according to mortgage company Freddie Mac.
Average rates had never fallen below 3% until a few weeks ago, and now they're going deeper into the 2s.
As mortgage rates keep plunging, they're making homes more affordable for buyers, and are giving owners opportunities to save hundreds of dollars a month when they refinance.
More mortgage rates for the history books
Mortgage rates have tumbled to another new all-time low.
Mortgage rates have dropped sharply over the last week, from an average 2.99% for a 30-year fixed-rate mortgage to just 2.88%. That's the lowest since Freddie Mac launched its weekly survey in 1971.
Borrowers are getting serious bargains compared to a year ago, when the typical rate stood at 3.60%. The survey rates come with an average 0.8 point.
"Rates continued to decline as bond investors reacted to the weak private employment data, high unemployment claims and continued uncertainty over a second stimulus package in Congress," says George Ratiu, senior economist at Realtor.com.
In other words, relatively safe Treasury bonds have become a popular investment amid the unease about jobs and the stalemate over new stimulus checks and other aid. Heightened demand for bonds has caused their interest to dwindle, and mortgage rates have fallen in sync.
"More downward rate movements may be on the horizon" if the news remains bad, says Matthew Speakman, an economist with Zillow.
On Friday, the talks over a new relief bill seemed to collapse. And while the government reported that the unemployment rate fell to 10.2% in July, from 11.1% in June, nearly 13 million fewer people were employed last month than in February.
Low rates benefit homebuyers and homeowners
Low rates have put a spark in the housing market.
Ultra-cheap mortgage rates have helped fire up the housing market this summer after a slow spring caused by coronavirus lockdowns.
"We continue to see strong buyer enthusiasm for real estate. There are many showings and offers, many in multiple-offer situations," says Corey Burr, senior vice president with Sotheby's International Realty in Chevy Chase, Maryland.
And, the low rates are helping offset rising home prices — and are even making houses more affordable.
America's median home price hit a record-high $349,000 in July, largely because of a shortage of homes for sale, Realtor.com has reported. But despite the higher prices, housing affordability in the U.S. is the best in four years, according to mortgage data firm Black Knight.
The typical monthly payment for new homeowners is $66 less than it was a year ago, and the average buyer can afford nearly $32,000 more home than at this time in 2019, Black Knight says.
Meanwhile, about 18 million existing homeowners who refinance at today's deeply reduced mortgage rates stand to save an average $287 a month, or more than $3,400 a year, Black Knight's research shows.
Experts say if you're among those millions, don't wait too long to refi. Mortgage rates are unpredictable and could rise if the headlines about COVID-19 and the economy start looking more optimistic.
Shop around for a refinance loan by gathering mortgage offers from multiple lenders and comparing them — to land the lowest rate you qualify for.
What other mortgage rates are doing
Rates on other types of home loans are falling, too.
The new Freddie Mac survey, released Thursday, shows rates on other popular types of mortgages also have gone down this week.
The average for a 15-year fixed-rate mortgage has dipped to 2.44%, from 2.51% last week. Fifteen-year mortgages are a popular choice for refinance loans and are much cheaper than they were last year at this time, when the average was 3.05%.
Rates on 5/1 adjustable-rate mortgages, or "ARMS," have slipped a few notches. The rates on those loans are fixed for five years and can then adjust up or down each year, following the track of a benchmark interest rate, like the prime rate.
ARMs are currently being offered at starter rates averaging 2.90%, down from last week's 2.94%.
At this time in 2019, the typical initial rate on a 5/1 ARM was 3.36%.
Once you've got your mortgage rate where you want it, put your homeowners insurance under the microscope. Go online, get home insurance quotes from several companies and review them closely, so you'll feel confident of getting the coverage you need at the best possible price.
