It has happened: U.S. borrowers are officially seeing the best mortgage rates in history.
Rates that had been falling for weeks are now at the lowest levels on record, according to a popular survey that has been tracking mortgage rates since 1971.
That means hordes of homeowners who still haven't refinanced need to snap to it, even if their current mortgage is only a year old. Rates were considerably higher last year at this time, so swapping out your loan for a new one at a much lower rate can bring substantial savings.
Data firm Black Knight on Sunday identified 12.8 million U.S. homeowners as refinance candidates — the highest number on record.
Rates have sunk as a kind of upside (if you want to call it that) to the coronavirus crisis. Fearful financial markets have sent interest rates plunging, including mortgage rates.
Mortgage rates drop to new all-time lows
Rates on home loans have gone to a place they've never been before, says Sam Khater, chief economist for mortgage company Freddie Mac.
“The average 30-year fixed-rate mortgage hit a record 3.29% this week, the lowest level in its nearly 50-year history," Khater said in a news release. "Meanwhile, mortgage applications increased 10% last week from one year ago and show no signs of slowing down."
Freddie Mac's previous all-time low rate for America's most popular mortgage was 3.31%, set in November 2012.
Rates have taken a dive from last week, when 30-year home loans were averaging 3.45%. One year ago, the typical rate was a much stiffer 4.41%.
The rates in Freddie Mac's March 5 survey come with an average 0.7 point.
Mortgage rates have been plunging as investors have bailed out of stocks and have huddled into Treasury bonds as a safer investment in case the coronavirus craters the economy. "Much remains unknown with this virus and its potential impact on human life and economic activity," says Matthew Speakman, economist with Zillow.
Bond interest rates have tanked, and mortgage rates tend to move in the same way.
Homeowners have even more reason to refinance
As Khater said, mortgage applications are pouring in, led by a spike in refinance requests. During the last week of February, those increased 26% from a week earlier — and were up a staggering 224% compared to a year ago.
But many homeowners are still missing out on the refi party, because they're clutching onto home loans with rates much higher than today's best-ever mortgage rates.
Black Knight says the average refinance candidate could save $277 a month by trading in their existing home loan for a new 30-year fixed-rate mortgage at a lower rate. You're considered ripe for a refi if you're sitting on a loan with a rate slightly above 4% and your credit score is over 720. (Don't know your credit score? You can check it for free.)
If the 12.8 million homeowners who ought to refinance went out and got new loans, they'd save a combined $3.5 billion a month, Black Knight says.
The refinance boom has lenders beefing up their workforces to meet the demand. Quicken Loans expects to hire "a few hundred new employees" every month this year, and United Wholesale Mortgage plans to add 2,000 people to its staff in 2020, Bloomberg reports.
Other mortgage rates this week
Rates on 15-year fixed-rate mortgages are approaching their own record low: They've fallen to 2.79%, on average, down from 2.95% last week, according to Freddie Mac. Those shorter-term loans are a popular refinancing option.
A year ago, 15-year fixed home loans were averaging 3.83%.
Rates on 5/1 adjustable-rate mortgages have dropped for a fifth straight week. Those "ARMs" are fixed for five years and then can adjust up or down every year that follows.
ARMs are currently being offered at an average initial rate of 3.18%, down from 3.20% last week. Last year at this time, the starter rates on ARMs were a steeper 3.87%, on average.