Mortgage rates have plunged to an unbelievable all-time low in one new survey, and another shows rates sticking close to a record low.
As the coronavirus has wrecked the U.S. economy and shaken up the financial markets, mortgage rates have gone places that experts never expected to see — and have saved borrowers truckloads of money in the process.
“At today’s mortgage rates, over 30 years, a homebuyer will pay interest equal to 49% of their original balance. At the start of last year, that figure was 83%,” says Dan Green, founder and CEO of the mortgage lender Homebuyer.
Can rates dive even deeper? Experts aren’t ruling it out.
Mortgage rates have ticked up in the widely followed weekly survey from mortgage giant Freddie Mac. After making history on July 16 by falling below 3% for the first time — to 2.98% — 30-year fixed mortgage rates last week were averaging 3.01% in the nearly 50-year old study.
That’s still far below last year at this time, when rates stood at an average 3.75%. The survey rates come with an average 0.8 point.
Meanwhile, mortgage rates continue to plummet in a separate survey, from Mortgage News Daily. On Thursday, it put 30-year mortgage rates at a jaw-dropping new record low: a mere 2.87%. On Friday they rose just slightly, to 2.89%.
“Psychologically, mortgage rates below 3% are a big deal. Financially, they’re a huge deal,” says Green.
Borrowers can now get a loan for a typical home that costs $125 less per month than a mortgage at last year’s rates, Realtor.com has reported.
More than 16 million homeowners can refinance, cut their rates by at least three-quarters of a point (maybe from 3.75% down to 3%) and save an average $283 a month, according to a study from mortgage data firm Black Knight.
Can rates go lower? Maybe, but don’t wait
Mortgage rates have plummeted as COVID-19 has prompted nervous investors to shift money into Treasury bonds, which are seen as a safe haven in uncertain times. The growing demand for bonds has pushed up their prices and gutted their interest rates — which set the pace for mortgage rates.
Bond rates, or yields, had been falling much faster than mortgage rates, but now the two have caught up and are moving more in sync. So, “mortgage rates have more or less exhausted their ability to move lower,” says Matthew Graham, chief operating officer of Mortgage News Daily.
But Mark Fleming, chief economist with the title insurance and real estate services firm First American, says rates could fall to 2.8% or even lower.
“There’s a floor there, around probably 2.5%. We’re just not going to go much below that because people get paid for credit risk and other things out of that mortgage rate,” Fleming told Yahoo Finance.
Negative interest rates from the Federal Reserve could push mortgage rates down much, much deeper, but the Fed has said it’s not going to go there.
So for now, there’s a possibility that today’s astonishingly low mortgage rates could get a bit better, but experts say don’t sit around if you’re thinking of buying a home or refinancing.
“There’s no rush to lock today’s rates but there’s also no reason to wait. Take advantage of the opportunity in front of you,” says Green, of Homebuyer.