Average Mortgage Rate Falls Below 3%
Those looking to buy a home or to refinance may encounter lower interest rates than they have before. According to Mortgage News Daily, the average rate for a 30-year fixed mortgage fell to just 2.97% last week. That marks a new record low as the economy continues to experience impacts from the coronavirus pandemic. With this being an average, some borrowers with stellar credit may apparently even see rates as low as 2.75%. The reduced rates are likely the result of renewed fears about the on-going pandemic. Specifically, concerns of a second wave of infections have led to economic volatility — as most recently exhibited on Wall Street this week.
Interestingly, this record low comes after it had appeared that rates were on their way back up. As Mortgage News Daily chief operating officer Matthew Graham explains, “This is a very abrupt and arguably unexpected change given that last week looked like a potentially scary lift-off for rates after an extended stay near the previous all-time lows.” Graham continued, “It suggests we shouldn’t count out the ability of interest rates to maintain these levels (or improve upon them) even if the economy continues showing signs of healing.”
In terms of where things go from here, it would depend on a few different factors, with Graham stating, “I think rate levels will be directly tied to the ability of the economy to recover. If it goes better than expected, rates would rise, and vice versa if things remain sluggish.” However, he adds, “Either way, the Fed is committed to keeping shorter-term rates lower for longer, and that will help to anchor longer-term rates like mortgages to some extent.”
Beyond the mortgage interest rates, there are still several other elements at play in the housing market. For example, CNBC notes mortgage credit availability fell to a near six-year low last month. At the same time, last week, applications to buy homes were up 13% year over year.
Although lower mortgage rates may seemingly make homes more affordable for buyers, it should be noted that home sale prices have been on the rise. In fact a 7% YOY gain in median sale price was observed in April. Because of this, it remains difficult to predict what shape the housing market will be in for the rest of the year and into next. However, in the meantime, we can expect more homeowners to take advantage of refinancing while rates are at record lows.