Mortgage interest rates have gone from astonishingly low to almost ridiculously low in a closely followed survey that's been tracking rates for almost half a century.
The extremely low mortgage rates are pulling would-be homebuyers out of COVID-19 lockdown and into the housing market, in what mortgage giant Freddie Mac is calling a "remarkable turnaround" for mortgage demand.
Homeowners are clinching rock-bottom rates, too, and are saving tens of thousands of dollars by refinancing.
Average mortgage rates skid to new record low
Mortgage rates have dropped this week to an average 3.15% for a 30-year fixed-rate home loan, from last week's 3.24%, Freddie Mac reported on Thursday.
"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," says Sam Khater, Freddie Mac's chief economist.
The survey rates come with an average 0.7 point. Last year at this time, the typical rate on a 30-year fixed mortgage was a steeper 3.99%.
The benchmark mortgage rate hasn't gone any higher than 3.33%, on average, since the beginning of April, and Freddie Mac predicts rates will stay low throughout the year. The firm is forecasting that 30-year mortgage rates will average 3.3% during 2020, way down from last year's 3.9%.
But researchers at Realtor.com have predicted that average rates "may slide under 3% by the end of the year," and some sub-3% rates are already out there. You just have to know where to find them.
Homebuying is on the rebound
Tumbling mortgage rates are drawing out hunkered-down homebuyers: Khater says demand for mortgages to buy homes has made a "remarkable turnaround given the sharp contraction in economic activity."
The Mortgage Bankers Association reported Wednesday that applications for purchase loans jumped 9% last week and have grown 54% since early April.
As low rates heat up the housing market, multiple offers and escalation clauses are starting to occur again, says Corey Burr, senior vice president with Sotheby's International Realty in Chevy Chase, Maryland. A buyer who submits an offer with an escalation clause expresses a willingness to go higher if someone else offers more.
Meanwhile, homeowners are refinancing into cheap mortgage rates to chop down their monthly payments and interest costs. With so many Americans swapping out their mortgages, Khater notes that the average refi loan size has fallen by $70,000 this year.
"This means a broader base of borrowers are taking advantage of the record low rate environment, which will benefit the economy," he says.
Other mortgage rates this week
Rates on other popular types of mortgage loans also have dipped this week, according to Freddie Mac.
The average for a 15-year fixed-rate mortgage has dropped to 2.62%, from 2.70% last week, the survey says. Fifteen-year loans are a popular refinance option and were averaging 3.46% one year ago.
Rates on 5/1 adjustable-rate mortgages are down, too. Those loans are commonly known as "ARMs" and have rates that are fixed for five years and then can adjust up or down every year.
ARMs are currently being offered at an initial rate of 3.13%; the average last week was 3.17%.
At this time last year, the starter rates on those mortgages were averaging 3.60%.