Rates drop for the third time during coronavirus pandemic
For the third time since the onset of COVID-19, the average rate for the 30-year mortgage has plummeted to its lowest level since Freddie Mac started tracking mortgage rates almost 50 years ago.
The Freddie Mac Primary Mortgage Market Survey showed that the 30-year fixed-rate mortgage (FRM) fell from last week's reading of 3.24% to 3.15% – surpassing the previous all-time low of 3.23% recorded in April.
“These unprecedented rates have certainly made an impact as purchase demand rebounded from a 35% year-over-year decline in mid-April to an 8% increase as of last week – a remarkable turnaround given the sharp contraction in economic activity,” Freddie Mac Chief Economist Sam Khater said.
The 15-year fixed-rate mortgage posted an eight-basis-point decline, down from 2.70% to 2.62%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) dipped four basis points from 3.17% to 3.13% this week. A year ago, the 15-year FRM was 3.46%, while the 5-year ARM averaged 3.60%.
Not only were the sharp interest cuts effective in stimulating the housing market, but low rates were also successful in boosting refinance activity amid the coronavirus crisis, according to Khater.
“Additionally, refinance activity remains elevated, and low mortgage rates have been accompanied by a $70,000 decline in the average loan size of refinance borrowers this year. This means a broader base of borrowers are taking advantage of the record low rate environment, which will benefit the economy,” he said.
