Rate Update: Mortgage Interest Rates Hit Record Lows
If this was a “normal” year, interest rates hitting all-time lows might be front page news. As we all know, 2020 has been anything but normal—and the record-low rates have barely been a blip in the recent news cycles.
Let’s look at how the mortgage rates have been trending along with the reasons for those trends and what the future may hold.
Record Lows Since the End of April. Although the interest rates on 30-year fixed-rate mortgages and 15-year fixed-rate mortgages were trending down before the Covid-19 pandemic, we’re now seeing lows that we’ve never seen before. In February, the rates on a 30-year fixed averaged 3.46 percent, according to Freddie Mac’s Primary Mortgage Market Survey. For the eight-week period between July 9 and August 27, the average weekly rate was 2.97 percent—the lowest it’s ever been. The 15-year fixed-rate also hit a new all-time low, with the rates coming in at 2.49 percent for the same eight-week period. Just as a comparison, the record for the lowest weekly rate since 1971 was 3.31 percent in Nov 2012. That weekly number has been eclipsed 18 straight times since the end of April.
Why Are the Rates So Low? The record-low rates are a direct result of the current economic downturn caused by the pandemic. In an attempt to keep interest rates low, the Federal Reserve cut its benchmark rate to zero and began buying mortgage-backed securities in “unlimited” quantities. Although mortgage interest rates tend to follow market conditions and investing trends rather than Federal Reserve cuts, the rate cut and policy of buying mortgage-backed securities has directly affected mortgage rates. Although there are certainly other reasons for the low rates, the Fed summed it up best in its statement on July 29: “The path of the economy will depend significantly on the course of the virus.”
The Future of Interest Rates. Due to the economic uncertainty, it’s impossible to predict the long-term future of interest rates, but the general consensus among experts is that mortgage interest rates—at least in the short-term—will either hover in the 3.0-3.3 percent range or drop slightly below the 3.0 percent mark. Continued economic concerns and the recent rise in coronavirus cases in July prompted Federal Reserve chair Jay Powell to declare that the Fed “are committed to using our full range of tools to support our economy in this challenging environment.” With that in mind, we’re likely to continue seeing low rates in the near term.
As we’ve seen in the past, interest rates can be very volatile, so if you’re looking to buy a home or refinance your current mortgage, make sure you talk to your mortgage professional about how interest rates are trending.
For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988.
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