Skip to main content
Haze icon
72º

A record low on average 30-year fixed mortgage: 3.29%

FILE - This Jan. 9, 2020, file photo shows a sold sign is posted on a real estate sign outside a home in Derry, N.H. On Thursday, March 5, U.S. long-term mortgage rates dropped to all-time lows this week as anxiety over risks to the economy deepened amid the burgeoning viral outbreak crisis. Mortgage buyer Freddie Mac says the average rate on the benchmark 30-year loan plummeted to 3.29% from 3.45% last week. (AP Photo/Charles Krupa, File) (Charles Krupa, Copyright 2020 The Associated Press. All rights reserved.)

WASHINGTON, D.C. – Long-term U.S. mortgage rates have sunk to a record low, giving many homeowners an opening to refinance their loans to free up money to spend or save.

The average rate on a 30-year fixed mortgage hit a record low of 3.29% this week from 3.45% last week, mortgage buyer Freddie Mac said Thursday. The decline is being driven by investors shifting money out of the stock market and into the safety of U.S. Treasurys as the coronavirus outbreak has deepened. Long-term mortgage rates tend to track the yields on the 10-year Treasury note, so they typically fall in tandem.

Recommended Videos



The new 3.29% average rate is the lowest for a 30-year fixed mortgage since Freddie Mac started tracking such rates in 1971.

A steady decline of mortgage rates has created a potential boon for would-be home buyers as well as for homeowners who can refinance into lower-rate loans. Refinancings can lower monthly payments and in some cases allow homeowners to tap additional cash from the equity in their home.

While rates have been historically low for years, every decline makes refinancing appealing to more people. Homeowners who plan to stay put can benefit most. Refinancing typically costs several thousand dollars in closing costs and other fees. But over time, saving a hundred or few hundred a month in monthly mortgage bills adds up.

The housing market is a key pillar of the U.S. economy, so any increase in purchase and refinancings could provide economic support. More money in the pockets of households tends to drive up consumer spending, the U.S. economy's primary fuel.

Yet ultra-low mortgage rates aren't likely to produce a significant rise in U.S. home sales this year. A major problem is that the supply of homes for sale remains at historic lows.

“We've had inventory for the last eight months basically shrinking each year-over-year by double digits,” said George Ratiu, senior economist for Realtor.com. “No matter how much buyers want to buy, there are not enough homes.”

Even where homes are available, prices are still unaffordable for many despite lower mortgage rates.

The new record-low mortgage rate came in a week when the Federal Reserve made a surprise cut in its benchmark rate to aid the economy in the face of the spreading coronavirus. Investors seeking safety and anticipating further rate cuts by the Fed to address the crisis have poured money into Treasurys and other fixed-income securities that are perceived as safe havens, lowering yields on those securities and leading to lower mortgage rates.

Home loan applications rose 10.3% last week from a year earlier, according to the Mortgage Bankers Association, while applications for mortgage refinancing soared more than twofold.

“Refinancing application volume has been strong all the way through 2020,” said Michael Fratantoni, the association's chief economist. “We did see a big response in refinance applications last week, and I expect the response to be even larger this week.”

Fratantoni noted that the rapid decline in mortgage rates has kept lenders busier than usual with refinancing applications. He expects that will continue, at least until the virus fears subside and rates stabilize.

Wells Fargo & Co., one of the nation's largest mortgage lenders, said it has seen an increase in mortgage applications. As a result, it says it is hiring more staff to support those applications and shifting employees from other departments of the company to help.

United Wholesale Mortgage, the second-biggest U.S. mortgage lender, has also seen a spike in mortgage applications. The company, which gets its business through independent mortgage brokers, has been making loans with rates in the high 2% and low 3% range, said Alex Elezaj, the lender's chief strategy officer.

“We're probably seeing about a 40% spike across the board in our business right now, and I would say probably 20% of that is attributed to the interest rate reduction,” Elezaj said.

The company reached a milestone Tuesday, with borrowers agreeing to lock in rates on $2.5 billion in loans, Elezaj said. Its previous record had been set just last week.

UWM is ramping up hiring of underwriters, customer service, account executives and others to keep up with the rising loan application volume. Elezaj expects to add 500-1,000 employees this year because of the lower rates.

On Thursday, Freddie Mac's survey of loan rates showed that the average rate on a 15-year fixed mortgage sliding this week to 2.79% from 2.95% last week. The 15-year rate is now at its lowest level since 1991.

Each week, Freddie Mac surveys lenders to compile its national mortgage rate figures. The average doesn't include extra fees, known as points, which most borrowers must pay to obtain the lowest rates.

The average rate for a five-year adjustable-rate mortgage declined to 3.18% from 3.20% last week.

The growing anxiety over the spreading COVID-19 virus, its potential economic damage and whether governments around the world will be able to contain it triggered a renewed slide in the U.S. stock market. Stock market averages tumbled more than 3% Thursday. Treasury yields reached further lows as anxiety escalated.

To date, the virus has infected nearly 97,000 people and killed over 3,300.

—-

Veiga contributed from Los Angeles, Sell from Portland, Oregon.


Loading...