Wow! Mortgage Rates Reach Lowest Level in Almost 50 Years
Mortgage rates have just dropped to the lowest level in almost 50 years, compelling both homeowners and home buyers to get off the couch to take advantage of record-level savings on their mortgage.
“The average 30-year fixed-rate mortgage hit a record 3.29% this week, the lowest level in its nearly 50-year history,” said Sam Khater, chief economist of mortgage giant Freddie Mac. “Meanwhile, mortgage applications increased 10% last week from one year ago and show no signs of slowing down.”
To put this record rate in perspective, 3.29% even dips below levels seen during the housing crisis. The average 30-year fixed-rate mortgage dropped to 3.31% in 2012.
At present, 15-year fixed-rate mortgages average 2.79% and five-year adjustable-rate mortgages 3.18%.
This news comes in the wake of the Federal Reserve’s decision on Tuesday to slash short-term federal interest rates by 50 basis points in an attempt to steady markets rocked by coronavirus fears. (A basis point, which is used to describe a change in percentage, is the equivalent of 0.01%.)
“A 50-basis-point cut in interest rates is very substantial. The Fed hasn’t cut rates like this since 2008,” says Tony Julianelle, CEO of Denver-based Atlas Real Estate. “This is a fantastic time to look at refinancing or purchasing property.”
What record-low rates could mean for mortgage borrowers
Record-low mortgage rates are the Black Friday sale of housing—after all, even a one-tenth of a percentage point rate difference can amount to thousands of dollars saved over the life of a 30-year loan.
“Refinances have already spiked, and most lenders are reporting a surge in overall applications,” says Julianelle.
“If you have a mortgage rate in the 4%-plus range, it likely makes sense to refinance,” says KC Conway, Alabama Center for Real Estate‘s director of research and chief economist of CCIM Institute, a real estate educational body.
That said, he continues, “this rate cut has a more stimulative impact on home equity lending, where homeowners can borrow really cheap to finally do a home improvement project or use the equity to pay off credit cards or a car.”
But not all refis are a good idea.
“It’s important to shop interest rates, because when volume increases like this, some lenders will hold rates higher to help throttle the demand back and not overload their own processes and systems,” Julianelle warns. “Others who may be more automated or flexible will drop rates more to gain market share.”]