Mortgage Rates Just Fell Below 2.7% For the First Time Ever
New year, new you, so the saying goes. But this year, add ‘new view’ to that adage, as homebuying is seeing a significant uptick in response to interest rates that have fallen in December to below 2.7% for the first time. Homebuyers are changing their point of view, figuratively and literally, and moving on up to the house or neighborhood of their dreams, thanks to interest rates that are a full percentage point less than a year ago.
Why the dramatic drop? Experts attribute the lower rate on 30-year fixed rate loans to the widespread coronavirus pandemic and hospitalizations. In an otherwise stagnant and struggling economy, the housing market has provided some much-needed economic stimulus. But it’s expected that at some point, the bubble will burst: a potential spending package from Congress and the arrival of a COVID vaccine could result in rates inching up in 2021.
Sinking Rates Lift The Market
One year ago, 30-year mortgages rates stood at an average 3.73%, more than a full percentage point higher than today’s rates. According to mortgage leader Freddie Mac, the most recent rate drop is the 15th time in 2020 that rates have fallen to historic lows.
A recent meeting of Federal Reserve policymakers provided good news for borrowers: the central bank retained its benchmark interest rate near zero, and planned to keep buying Treasury bonds and mortgage-backed securities, all of which will contribute to low mortgage rates.
The Lowdown On Low Rates
According to Matthew Speakman, an economist with Zillow, the low rates available in recent months might not stick around forever. “Sharper movements may be on the way as lawmakers reportedly move closer to a stimulus deal. A new spending package may place some upward pressure on mortgage rates, particularly if the package contains more than has been reportedly debated,” says Speakman.
Mortgage Bankers Association reports that refinance loan requests are more than double the rate of a year ago, but many homeowners are still holding out, hopeful that the rates will dip even more. Mortgage and technology data provider Black Knight estimates that more than 19 million mortgage holders who have refrained from refinancing could save about $308 per month if they refinance at the current low rates.
A Window Of Opportunity In Homebuying
Research from Realtor.com indicates that the low rate has created soaring demand for houses, resulting in home sales being at their strongest pace in 15 years. Owing to the super-low rates, “…buyers have not had to worry about affordability from a monthly payment perspective,” according to Danielle Hale, chief economist at Realtor.com. The effects of COVID-19, however, have adversely affected new builds and completion, says Realtor.com senior economist George Ratiu.
Real estate experts suggest that homebuyers compare a minimum of five mortgage offers in order to secure the best deal, as interest rates — low as they are — can vary from lender to lender.