Home-loan hunters in Chicago and across the nation now are flocking to some of the best rate deals in history as interest charges continue to slide.
On February 6th, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year-fixed loans averaged 3.45%—the lowest in three years. A week earlier the popular rate averaged 3.51%. A year ago, lenders were charging 4.41% for 30-year fixed-rate loans.
Meanwhile, rates on 15-year-fixed mortgages averaged 2.97% down from 3% a week earlier. A year ago, 15-year fixed loans averaged 3.84 percent.
On February 6th, Chicago lenders were quoting a range of 3.3% to 3.481% on 30-year-fixed mortgages, according to rateSeeker.com.
Mortgage rates reached a historical rock bottom on November 21, 2012, when the 30-year fixed mortgage average hit 3.31%, according to Freddie Mac’s archives. That milestone could be surpassed in early 2020 if current trends continue.
On February 5th, the Mortgage Bankers Association reported that home-loan applications rose 5% from the prior week to the highest level since May of 2013.
The 10-year Treasury yield, a benchmark for mortgage bond investors, dropped nearly 20 basis points in early February as economic concerns over the Chinese coronavirus continued to spread.
Apparently, the spread of the coronavirus is making investors around the world anxious, and when they get nervous, they tend to sell off stocks and seek the save haven of U.S. bonds. An increased competition for bonds means investors, including those who buy mortgage-backed bonds, have to take lower yields. That translates into lower mortgage interest rates.
The MBA also reported:
• The Refinance Index spiked by 15% to the highest level since June of 2013. Compared with a year earlier, the index was a whopping 183% higher.
• The refinance share of mortgage activity increased to 64.5% of all home loan applications, compared with 60.5% a week earlier.
“As rates fell for the third consecutive week, markets staged a rebound with increases in manufacturing and service sector activity,” noted Sam Khater, Freddie Mac’s Chief Economist. “The combination of very low mortgage rates, a strong economy and more positive financial market sentiment all point to home purchase demand continuing to rise over the next few months.”
More than 20 years ago—in August of 1999—when many of today’s Millennial borrowers were in grammar school, lenders were quoting 8.15% on a 30-year fixed mortgage, according to Freddie Mac.
However, to really appreciate today’s historically low interest rates, housing experts say home buyers need only to look at what banks and mortgage lenders where charging more than three decades ago in the early 1980s.
According to Freddie Mac, benchmark 30-year mortgage rates peaked at a jaw-dropping 18.45% in October of 1981 during the Great Recession of the 1980s. Rates fell below 10% in April of 1986, and then bounced in the 9%-to-10% range during the balance of the 1980s.
Archives of the now-defunct Federal Housing Finance Board show long-term mortgage rates were relatively affordable five decades ago at 5.81% to 5.94% between 1963 and 1965.
In 1966 and 1967, borrowers paid an average of 6.3% to 6.4%. In the 1960s, rates last dipped below 6.5% in January of 1968, when the national average hit 6.41%. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6%-to-9% range.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.