Mortgage rates plunge to new low, but you may need to hurry
4 min read
For the fifth time since early March, mortgage interest rates have dropped to a record low in a closely watched survey that’s been tracking rates since 1971.
Mortgage giant Freddie Mac, which conducts the survey each week, says even lower rates are possible later in the year.
But in the near-term, rates could rise as investors react to the government’s blockbuster jobs report for June. America’s unemployment rate fell from 13.3% to 11.1% last month as employers coming out of coronavirus lockdowns added a record 4.8 million jobs.
Whenever positive economic news pushes stocks higher, interest rates tend to rise, too. So if you’re hoping to score an unbelievably low mortgage rate to buy a home or refinance right now, you may need to move fast.
Mortgage rates hit another record low
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Low mortgage rates have shattered their record yet again.
Mortgage rates have been in a downward spiral, and this week it has spun them all the way down to an average 3.07% for a 30-year fixed-rate home loan, mortgage company Freddie Mac reported on Thursday.
The average rate is the lowest ever in Freddie Mac’s nearly 50-year-old survey and is the latest in a long string of new lows that began on March 5, in the early days of the health crisis.
The survey rates come with an average 0.8 point. One year ago, borrowers were landing 30-year fixed-rate mortgages averaging 3.75%.
“Mortgage rates continue to slowly drift downward with a distinct possibility that the average 30-year fixed-rate mortgage could dip below 3% later this year,” says Sam Khater, Freddie Mac’s chief economist.
Another, more frequent survey of lenders already has been turning up rates under 3%: Mortgage News Daily says 30-year rates this week have dipped back to an average 2.94%, which is the lowest the publication has ever seen.
And, borrowers who are excellent comparison shoppers have been able to find mortgage rates as jaw-droppingly low as 2.5%.
Rates tumbled this week as the financial markets nervously watched the U.S. coronavirus numbers explode, says Matthew Speakman, an economist with Zillow.
“If the uptick in cases does indeed prevent states or cities from continuing their plans to reopen, or even prompt more closures, then rates would likely plunge further and reach new lows,” Speakman says.
The risk of rising rates from the jobs report
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Improvement in the job market could lead to rising mortgage rates.
But rates could head upward if there are signs the economy is continuing “its slow reversion to ‘normal,'” says Speakman.
The strong June jobs report appears to be one of those signs. The jobless rate skyrocketed in April to 14.7%, the worst since the Great Depression, but it has been coming down steadily since then.
“The normal implication would be for upward pressure on interest rates. That said, any troubling developments in terms of COVID case counts could easily offset a strong jobs number,” writes Matthew Graham, chief operating officer of Mortgage News Daily.
But Wall Street celebrated the employment report by rallying, and there’s the risk mortgage rates could rise along with stock prices, which often happens. If you’re currently in the market for a mortgage, you may want to get to work on shopping around to find a low rate — so you won’t miss your chance.
Owners who refinance mortgages with rates close to 4% (and there are lots of those loans out there) can cut their monthly payments by hundreds of dollars.
When a homebuyer snags a low mortgage rate, it can take some of the sting out of the need to bid high in a housing market that’s short on houses for sale.
“Since Maryland and Washington, D.C., eased the lockdown during the second week of May, the market has been on fire,” says Corey Burr, senior vice president with Sotheby’s International Realty in Chevy Chase, Maryland. “Buyers in today’s hot market need to be prepared to make an outstanding offer that beats the competition.”
Supplies of homes are tight because some potential sellers have been leery about having buyers troop through their homes during the pandemic.
Other mortgage rates this week
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Rates are down across the board this week.
Rates on other popular types of home loans also have gone down, Freddie Mac says.
The average for a 15-year fixed-rate mortgage has fallen to 2.56%, from 2.59% last week. Fifteen-year loans are a popular refinance option and are much cheaper than they were a year ago, when rates on the shorter-term home loans were averaging 3.18%.
And, rates on 5/1 adjustable-rate mortgages have slid this week. Those loans are known as “ARMs” and have rates that are fixed for five years and then can adjust up or down every year, moving along the same path with a benchmark interest rate, like the prime rate.
ARMs are currently being offered at initial rates averaging an even 3%, down from 3.08% last week. Last year at this time, the typical starter rate on those mortgages was 3.45%.
Be sure to comparison shop for your homeowners insurance the same way you comparison shop for a mortgage. You can easily go online and get several home insurance quotes to compare rates and find the best policy.
