For the fifth time since early March, mortgage interest rates have dropped to a record low in a closely watched survey that has been tracking rates since 1971.
Mortgage giant Freddie Mac says its weekly survey could show even lower rates later in the year.
But rates could rise in the short term as investors react to the government’s highly successful employment report for June. The U.S. unemployment rate fell from 13.3% to 11.1% last month, as employers who came out of coronavirus blockades added a record 4.8 million jobs, officials said Thursday.
Mortgage rates hit another record low
Mortgage rates have been on a downward spiral, and this week has cut them to an average of 3.07% for a 30-year fixed-rate mortgage loan, mortgage company Freddie Mac reported Thursday.
The average rate is the lowest in Freddie Mac’s nearly 50-year survey and is the latest in a long series of new lows that began on March 5, in the early days of the health crisis.
Survey rates come with an average of 0.8 points. A year ago, borrowers were obtaining 30-year fixed-rate mortgages with an average of 3.75%.
“Mortgage rates continue to drop slowly with a clear possibility that the average 30-year fixed-rate mortgage will drop below 3% later this year,” says Sam Khater, chief economist at Freddie Mac.
Another more frequent survey of lenders has already been raising rates below 3%: Mortgage News Daily says 30-year rates entered the long vacation weekend at an average of 2.94%, which is the lowest that the publication has seen.
And, borrowers who are excellent comparison buyers have been able to find mortgage rates as incredibly low as 2.5%.
Rates fell this week as financial markets nervously watched the explosion of US coronavirus numbers, says Matthew Speakman, an economist at Zillow.
“If the increase in cases actually prevents states or cities from continuing their reopening plans, or even causing more closings, then rates will likely drop further and hit new lows,” Speakman says.
The risk of rising employment report rates
But rates could rise if there are signs that the economy is continuing “its slow reversion to ‘normal’,” Speakman says.
At first glance, the strong June employment report seemed to be one of those signs. The unemployment rate soared in April to 14.7%, the worst since the Great Depression, but has been steadily declining since then.
“The normal implication would be upward pressure on interest rates. That said, any troubling development in terms of COVID case counts could easily offset a strong number of jobs,” writes Matthew Graham, COO of Mortgage News Daily .
Still, Wall Street held the employment report in a meeting, and there is a risk that mortgage rates will rise along with stock prices, which often happens. If you’re currently in the mortgage market, you may want to get to work looking for a low rate, so you don’t miss your chance.
Homeowners who refinance mortgages with rates close to 4% (and there are many of those loans available) have the potential to reduce their monthly payments by hundreds of dollars.
And when home buyers get low mortgage rates, it may take part in the need to make a high offer in a real estate market that has few homes for sale.
“Since Maryland and Washington DC reduced the shutdown during the second week of May, the market has been on fire,” says Corey Burr, senior vice president at Sotheby’s International Realty in Chevy Chase, Maryland. “Buyers in today’s market need to be prepared to make an exceptional offer that outperforms the competition.”
Home supply is in short supply because some potential sellers have been wary about having buyers tour their homes during the pandemic.
Other mortgage rates this week
Rates for other popular types of home loans have also dropped, says Freddie Mac.
The average 15-year fixed-rate mortgage has fallen to 2.56%, from 2.59% last week. Those short-term loans are a popular refinance option, and they’re much cheaper than a year ago, when rates averaged 3.18%.
And, 5/1 adjustable-rate mortgage rates have fallen this week. These loans are known as “ARM” and have rates that are set for five years and can then be adjusted up or down each year, following the same path with a reference interest rate, such as the prime rate.
ARMs are currently offered at initial rates averaging even 3%, down from 3.08% last week. Last year at this time, the typical initial rate on these mortgages was 3.45%.
Be sure to compare your homeowners insurance the same way you compare a mortgage. You can easily go online and get various home insurance quotes to compare rates and find the best policy.
