Mortgage rates plunge to a new all-time low and lure more homebuyers
Mortgage rates are on a roll — and it's all downhill.
Amid the financial fallout from the COVID-19 pandemic, rates have plummeted to a new all-time low: an average of less than 3.25% for 30-year fixed-rate mortgages, according to a long-standing survey.
Homeowners have been in a frenzy to refinance and reap big savings, and now more homebuyers joining the party. Lenders say thanks in part to today's remarkably low mortgage rates, buyers are submitting more mortgage applications than they have in weeks.
Rates hit a new low as homebuyer borrowing increases
Mortgage rates have dropped to another all-time low.
Mortgage rates have taken a big slide — to an record-low average of 3.23% for a 30-year fixed-rate home loan, from 3.33% last week%, mortgage giant Freddie Mac reported on Thursday.
The company's survey has been tracking mortgage rates since 1971.
It's the second report this week to find rates at a new low point. On Wednesday, the Mortgage Bankers Association, or MBA, said rates fell to an all-time-low average of 3.43% in its weekly survey.
With rates so attractive, mortgage applications from homebuyers jumped 12% last week and reached their highest level in about a month.
"The 10 largest states had increases in purchase activity, which is potentially a sign of the start of an upturn in the pandemic-delayed spring homebuying season, as coronavirus lockdown restrictions slowly ease in various markets," says Joel Kan, the MBA's associate vice president of forecasting.
Homebuying is steadily coming back in California and Washington state, and New York — hard-hit by COVID-19 — saw a big increase in purchase loan applications last week, after several weeks of declines.
People in the real estate business have been doing all they can to increase sales, despite the challenges posed by the outbreak.
"Brokerages and agents are doubling down on virtual tours," says Corey Burr, senior vice president with Sotheby's International Realty in Chevy Chase, Maryland. "And agents are abiding by strict Centers for Disease Control guidelines for showing properties" — meaning hand sanitizer and gloves are now standard equipment.
Refinancing rolls along
You can still find good refinance rates, but you have to shop around for them.
Low mortgage rates also are continuing to pump up demand for refinance loans, says Sam Khater, Freddie Mac's chief economist. Homeowners who refi are finding they can slash their interest costs and their monthly payments.
But with homebuying taking more of the spotlight, refinances fell to 71.6% of all mortgage applications last week, from 75.4% a week earlier.
Demand for refinance mortgages dropped 7%, but lenders received 218% more refi applications than they did a year earlier. That's more than triple the number.
Refinance requests may have declined because some lenders have raised their rates for refi loans — after they were getting more refinance applications than they could handle.
"Lenders are still working through pipelines at capacity, and observed changes in credit availability for refinance loans have also in turn impacted rates," says Kan, of the Mortgage Bankers Association.
Refinancing can be well worth your while, even if your current mortgage is fairly new. If you refi a loan taken out just one year ago, you can cut your monthly payment by $60 for every $100,000 you borrow, a recent LendingTree study found.
If you want to find the lowest mortgage rate for your refinance, you'll definitely need to shop around. Gather rates from at least three lenders and compare them.
Don't ever go with the first rate you see, because different mortgage lenders can offer vastly different rates, and some can be on the high side — even when average rates are at all-time lows.
