The Mortgageland interest-rate roller coaster has plummeted to a historic record low of 3.15% nationwide—the lowest ever recorded by the Freddie Mac’s Primary Mortgage Market Survey, which dates back to 1971.
Sparked by worldwide investor panic fueled by the spread of the coronavirus, average benchmark 30-year fixed-rate mortgages fell to 3.15% on May 28th from 3.24% a week earlier. A year ago, the 30-year fixed loans averaged 3.99%.
This means Chicago home buyers and families seeking to refinance now have a once-in-a-lifetime opportunity to lock in the lowest mortgage interest in nearly five decades.
On May 28th Mutual of Omaha was quoting a rock bottom 3.125%, reported RateSeeker.com. Under an aggressive loan program involving pledged money-market funds, Huntington Bank, was quoting 2.325% on a seven-year jumbo adjustable-rate mortgage (ARM) with 30% down payment, according to mortgage broker Brian Bockholdt.
“The average 30-year fixed-rate mortgage hit a record 3.15% on May 28th, the lowest level in its nearly 50-year history,” said Sam Khater, Freddie Mac’s Chief Economist. Fifteen-year fixed loans averaged 2.62%, down from last 2.70% a week earlier. A year ago, 15-year fixed loans averaged 3.46%.
“The 30-year fixed-rate mortgage has again hit the lowest level in our survey’s nearly 50-year history, breaking the record for the third time in just the last few months,” said Khater.
“These unprecedented rates have certainly made an impact as purchase demand rebounded from a 35-percent year-over-year decline in mid-April to an 8-percent increase as of last week—a remarkable turnaround given the sharp contraction in economic activity,” Khater said.
“Additionally, refinance activity remains elevated and low mortgage rates have been accompanied by a $70,000 decline in the average loan size of refinance borrowers this year,” he noted. “This means a broader base of borrowers are taking advantage of the record-low rate environment, which will benefit the economy.”
Before the sharp dip in interest charges spring, mortgage rates last 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.
Below 3% rates on horizon?
How much lower can home-loan rates go? One prominent lender—United Wholesale Mortgage—reportedly is offering sub-3% rates. The lender announced that it would be offering interest rates as low as 2.5%. Never before had a big lender quoted rates that low.
Until about three months ago, experts said it was unthinkable that interest rates would ever fall below the previous record low of 3.31%. But then the coronavirus happened.
Fed pushed rates to record lows
Mortgage rates fell after the Federal Reserve began buying mortgage-backed securities (MBS) to stimulate demand, said Chris Low, chief economist of FHN Financial in New York. The Fed has purchased more than $500 million in MBS after relaunching a bond-buying program it used during the financial crisis more than a decade ago.
“The Fed is by far the biggest buyer of mortgages now, and because of that, they have almost complete control over the interest rate,” Low said.
That means the central bank has the ability to stimulate home sales by driving rates to lows that most people wouldn’t have thought possible a few years ago, said Low. “Home sales are holding up extraordinarily well, and that’s in large part because of the mortgage rates.”
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.