Mortgage rates, which have been pushing their way lower and lower this year, have now made it all the way down to a breathtaking level.
The typical rate on America's most popular home loan — the 30-year fixed-rate mortgage — has dropped below 3% for the first time, according to a survey from Mortgage News Daily. The experts there say the average lender is "easily able" to offer sub-3% loans.
Mortgage rates reached their new record low as financial markets were thrown into turmoil by reports suggesting a second wave of coronavirus cases may be building in the U.S.
Rates dive as investors worry
Mortgage rates plunged in the midst of Thursday's stock market sell-off. As investors moved out of stocks and into bonds as a safer place for their money, Treasury bond interest fell — and mortgage rates followed.
The average rate for a 30-year fixed-rate mortgage sank to 2.94% on Thursday, from 3.03% a day earlier, according to Mortgage News Daily's survey of lenders.
On Friday the typical rate went up just slightly, to 2.95%.
"The average lender is now easily able to offer rates under 3.0% for ideal conventional 30-year fixed scenarios," says Matthew Graham, chief operating officer of MND.
Stocks had their worst day in months following news that another 1.5 million Americans signed up for unemployment, and after the Federal Reserve issued a gloomy economic forecast. The unemployment rate, which was 13.3% in May, will be a still-high 9.3% by the end of the year, Fed projections say.
But what really got the market rattled was reports the coronavirus may be on the rise as states reopen.
"Recently strong economic data was all well and good, but with coronavirus numbers spiking in several states, the sustainability of the economic improvement is in question" Graham writes.
How low can mortgage rates go?
Though mortgage rates are primarily influenced by Treasury bond yields (rates), they've also been pushed down by the Fed's near-zero interest rates and its campaign of buying up mortgage-backed securities to help the economy.
Those are mortgages bundled together into investments similar to bonds. The Fed's actions are raising prices for the securities and lowering their yields for investors — which is helping to lower mortgage rates.
Fed policymakers met last week and indicated they're likely to hold their key interest rate close to zero for the next two and a half years, plus they said they'd keep up their purchases of mortgage-backed securities.
"With no end in sight for this Fed policy, it’s likely that mortgage rates are poised to remain low for a while," says Matthew Speakman, an economist with Zillow.
Can they go even lower?
"Markets will continue to take major cues from COVID-19 numbers and the resulting impact on the economy," says Graham. "The better it goes, the more upward pressure we might see on rates. The worse it goes, the greater the possibility of a return to all-time lows."
How to find a mortgage rate under 3%
Before they dipped below the 3% line, shrunken mortgage rates were already driving a rebound in home sales and a refinance rush among homeowners.
"Almost everyone in America should be refinancing right now — if they can," says Alan Rosenbaum, founder and CEO of the New York-based mortgage lender GuardHill Financial Corp., speaking in a webinar.
You're a good refinance candidate if you're a homeowner with a 30-year mortgage, a credit score of 720 or better, at least 20% equity in your house, and a rate on your current home loan that could be cut by at least three-quarters of 1 percentage point (0.75) through a refinance, says mortgage data firm Black Knight.
Based on a recent survey from mortgage giant Freddie Mac that had 30-year rates averaging 3.15%, Black Knight said some 14 million Americans could refinance and save an average $282 per month.
But whether you're a homeowner or a homebuyer, finding a rate under 3% may take some shopping around, says Graham.
"There is still a fair amount of variability between lenders and even more of a difference between various types of loans and borrowers," he says.
Different lenders can offer the same borrower 30-year mortgages with rates that vary by 1 percentage point or more, according to a LendingTree report. So, experts say it's crucial that you research and compare rates from multiple lenders to find the lowest rate available to you.