Mortgage rates, which have been pushing their way lower and lower and lower this year, have now dropped to a breathtaking level.
The typical rate on America’s most popular home loan — the 30-year fixed-rate mortgage — has fallen below 3% for the first time, according to a survey from Mortgage News Daily. And, the experts there say the average lender is “easily able” to offer sub-3% loans.
Mortgage rates hit their new record low as financial markets were thrown into turmoil by reports suggesting a second wave of coronavirus cases may be building in the U.S.
Rates dive as investors worry
Mortgage rates plunged in the midst of Thursday’s stock market sell-off. As investors moved out of stocks and into bonds as a safer place for their money, Treasury bond interest fell and mortgage rates followed.
The average rate for a 30-year fixed-rate mortgage sank to 2.94%, from 3.03% on Wednesday, according to Mortgage News Daily’s survey of lenders. On Friday, the rate inched up to 2.95%.
“The average lender is now easily able to offer rates under 3.0% for ideal conventional 30-year fixed scenarios,” says Matthew Graham, chief operating officer of MND.
Stocks had their worst day in months following news that another 1.5 million Americans signed up for unemployment, and after the Federal Reserve issued a gloomy forecast looking for joblessness to remain high through the end of the year.
But what really got the market rattled was reports that the coronavirus may be on the rise as states reopen.
“With COVID-19 numbers spiking in several states, the sustainability of the economic improvement is in question,” Graham writes.
How low can mortgage rates go?
Though mortgage rates take their cues from Treasury bond yields (rates), they’ve also been pushed down by the Federal Reserve’s near-zero interest rates and the Fed’s campaign of buying up mortgage-backed securities to help the economy.
Those are mortgages bundled together into investments similar to bonds.
At their meeting this week, Fed policymakers indicated they’re likely to hold rates close to zero for the next two and a half years and said they’d keep up their purchases of mortgage-backed securities.
“With no end in sight for this Fed policy, it’s likely that mortgage rates are poised to remain low for a while,” says Matthew Speakman, an economist with Zillow.
Graham says rates have been unpredictable and will remain that way.
“Rates may indeed be able to press further into new lows, but at some point, the lowest rates of all-time will be behind us for a period of many months or years,” he says.
How to find a mortgage rate under 3%
Before they dipped below the 3% line, low mortgage rates were already driving a rebound in home sales and a refinance rush among homeowners.
“Almost everyone in America should be refinancing right now — if they can,” says Alan Rosenbaum, founder and CEO of the New York-based mortgage lender GuardHill Financial Corp., speaking in a webinar.
You’re a good refinance candidate if you’re a homeowner with a 30-year mortgage, a credit score of 720 or better, at least 20% equity in your home, and a rate on your current home loan that could be cut by at least three-quarters of 1 percentage point (0.75) through a refinance, says mortgage data firm Black Knight.
Based on mortgage giant Freddie Mac’s recent survey that put 30-year rates at an average 3.15%, Black Knight said some 14 million Americans could refinance and save an average $282 per month.
But whether you’re a homeowner or a homebuyer, finding a rate under 3% may take some shopping around, says Graham.
“There is still a fair amount of variability between lenders and even more of a difference between various types of loans and borrowers,” he says.
A recent LendingTree study found different lenders can offer the same borrower 30-year mortgages with rates that vary by 1 percentage point or more. So, experts recommend that you research and compare rates from several lenders to find the lowest rate available to you.
Source: Yahoo finance
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