Another astonishing record for mortgage rates
The average for a 30-year fixed-rate mortgage — America's most popular type of home loan — shriveled Tuesday and Wednesday to just 2.92%, then slipped another notch on Thursday to 2.91%, Mortgage News Daily reports.
For much of last week, the typical rate had stood at 2.94%, the survey's previous all-time low which was initially reached in mid-June. Rates had popped back above 3% for a brief time late last month before declining again.
The new record is kind of surprising because recent news about the economy has seemed encouraging — like last week's employment report showing U.S. businesses added a record 4.8 million new jobs in June. Those kinds of upbeat economic announcements usually push stocks and interest rates higher.
But the markets aren't playing by the normal rules right now, says Matthew Graham, chief operating officer of Mortgage News Daily.
"There are several reasons for this, but the simplest one is that the jury is still out with respect to rising COVID statistics in several states," Graham writes.
Hospital beds are filling up, especially in the South and the West, and states are requiring people to wear masks or are even going back into lockdown.
States that are home to roughly 60% of the U.S. population have either put their reopening plans on hold or have decided to close up again, says a report from financial giant Goldman Sachs.
Where do mortgage rates go from here?
A widely followed weekly survey from mortgage company Freddie Mac on Thursday also put 30-year mortgage rates at a new record low, averaging 3.03% this week.
Homebuyers who are able to find a home sweet home in today's tight housing market are getting incredibly cheap loans, and homeowners who refinance into lower rates are cutting their mortgage payments by a hefty $283 a month, on average, according to a recent study from the data firm Black Knight.
Mortgage rates keep shattering records not only because of the low interest — or yields — on Treasury bonds, but also thanks to the Federal Reserve's strategies to pull the economy out of recession. The Fed slashed a key interest rate to near zero and has taken other steps to keep borrowing costs low.
Experts say the rates on home loans are likely to stay down.
"When it's clear that a majority of the economy is once again operating as it was before coronavirus (to whatever extent that's possible), or even when we're clearly headed in that direction, THAT'S when we're more likely to see the telltale effects on interest rates," says Graham.
"Until then, low rates and small day-to-day changes are the rules," he adds.
But while mortgage rates are available for under 3% (and even as low as 2.5%), not every lender is going to offer you the lowest rates out there. Research from LendingTree has found that different lenders can offer the same borrower rates as far apart as 1 percentage point or more.
In other words, Larry the Lender might offer you a 30-year loan at 3.99%, but if you keep searching you'll find that his rival, Louie, will give you a similar loan at just 2.95%.
Shopping around is crucial. Don't ever stop with Larry and the very first offer you get. Instead, gather and compare rate quotes from multiple lenders so you'll land the lowest possible rate, based on your credit score and the rest of your financial profile.
And do the same thing when it's time to buy or renew your homeowners insurance. Just go online, review policies and prices from several home insurance companies, and find the best coverage with the lowest premiums.