Why rates are going so low
The Fed chairman has been on a kind of tour spreading the message that the COVID-19 pandemic is giving the economy one of its worst beatings in history.
"The scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II," Powell told members of the Senate Banking Committee in mid-May.
More recently, he told lawmakers that a full recovery won't come until the public is confident the disease is contained. And the longer the recession lasts, "the greater the potential for longer-term damage from permanent job loss and business closures," Powell said.
As Powell has shared his gloomy outlook, mortgage rates that were already at or near record lows have tumbled further.
"If investors are worried about a prolonged recession, they’ll buy safe assets like bonds, causing interest rates to go down — which we saw happen after Chairman Powell’s comments," says Brendan Philips, capital markets analyst with the online mortgage lender Better.com.
Frank Nothaft, chief economist with CoreLogic, says mortgage rates are under even more downward pressure because the Fed is buying up mortgage-backed securities to bolster the economy.
Those securities are mortgages bundled together into investments similar to bonds. The Fed's buying spree has been pushing up prices for mortgage-backed securities — which has helped mortgage interest rates go down.
If you're looking to buy a home or a refinance, use the calculator below to see how you could benefit from one of today's low rates.
Where sub-3% rates are showing up
The average rates on 30-year fixed-rate FHA-backed loans and VA loans have plunged far below 3%, and conventional 30-year fixed-rate mortgages fell in mid-June to an average below 3% for the very first time, according to Mortgage News Daily.
In mid-July, average rates dropped below 3% in the long-running survey from mortgage giant Freddie Mac.
Says CoreLogic's Nothaft: "Our forecast is for the 30-year conventional fixed-rate mortgage to average 3.0% during the second half of 2020. Some days it will be lower than 3% and some days higher."
Next year rates will drop further, says a forecast from mortgage company Fannie Mae. Thirty-year mortgages will average 2.8% during the first half of 2021 and just 2.8% in the second half.
One of the nation's largest home lenders is moving quickly and deeply below the 3% mark. United Wholesale Mortgage has announced it's making available a mortgage that can be offered to borrowers at a jaw-dropping 2.5% interest.
"We believe that the housing market is going to be strong and we want to do our part to help more people get into their dream homes as we get through this pandemic together as a nation," says UWM's CEO Mat Ishbia.
The "Conquest" mortgage is being offered through independent mortgage brokers, for both purchase and refinance loans. The fine print includes a stipulation that a borrower cannot have taken out a UWM loan within the last 18 months.
How to get a mortgage below 3%
An astoundingly low mortgage rate will reward you with a dramatically lower monthly payment.
To find a rate south of 3%, you've got to shop, shop, shop around. Gather and compare rates from several lenders.
Make sure your credit score is exceptional (in the 800 to 850 range) or very good (740 to 799). Haven't looked at your score in a while? You can peek at it for free.
And never try to "time the market," says Philips, with Better.com.
"The cost of waiting to see if rates go lower could backfire, not making it worth the risk. The best rule of thumb is that if the numbers make sense, seize the opportunity," he says.
Take a look at today's best mortgage rates where you are: