Mortgage rates have gotten even more affordable — a boon to the many Americans once again considering buying a home as coronavirus-related stay-at-home orders are lifted across the country.
The 30-year fixed-rate mortgage dropped to an average of 3.15% during the week ending May 28, a decrease of nine basis points from the previous week, Freddie Mac
reported Thursday. This represents the lowest level since Freddie Mac began tracking this data starting in 1971. A year ago, the 30-year fixed-rate mortgage averaged 3.99%.
The previous record low was set at the end of April, when the average rate on a 30-year home loan dropped to 3.23%. This is now the third time in 2020 when the mortgage market has recorded a new historical low for interest rates.
The 15-year fixed-rate mortgage dropped eight basis points to an average of 2.62%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.13%, down four basis points from a week ago.
Rates have remained low by historical standards for many weeks now — and that’s a sign that the relationship between mortgage rates and bond yields has improved. Historically, mortgage rates have roughly tracked the direction of the 10-year Treasury yield
. But that relationship was disrupted thanks to volatility in the mortgage market due to the wave of forbearance requests prompted by the coronavirus-fueled economic downturn.
Volatility in financial markets also made bond yields something of a moving target for mortgage firms, which made it more difficult for them to peg where rates should be.
“Financial volatility has notably decreased in recent weeks, resulting in steady improvements in the stock market, and more predictable — albeit modest — movements in bond markets,” Zillow
economist Matthew Speakman said. “The eased strains in financial markets have also resulted in mortgage rates remaining fairly flat in the last couple of weeks and are generally calmer following the turmoil experienced in the early days of the coronavirus outbreak.”
The strong performance of the stock market, as evidenced by recent gains in the Dow Jones Industrial Average
and the S&P 500
, could mean that low rates are here to stay for the foreseeable future.
That’s music to the ears of many Americans looking to purchase a home in the coming months. The number of mortgage applications for loans used to buy a home has risen for six straight weeks, according to the Mortgage Bankers Association. The volume of purchase loans is now up 54% from early April, when loan application volume dropped in the face of the coronavirus pandemic.
Refinance volume has tapered off on a weekly basis, but remains 176% above levels seen a year ago, the mortgage industry trade group noted.
As buyers line up financing, home sales should see a rebound from the declines seen in March and April, making for a delayed spring home-buying season.
Not all buyers though will get the chance to lock in a rock-bottom rate, though. The Freddie Mac survey tracks conventional loans — meaning those that can be purchased by Freddie Mac and Fannie Mae
When it comes to other types of loans, including FHA and jumbo mortgages, rates tend to be much higher.