Mortgage Rates Hit 10th Record Low
by Christy Bieber | Oct. 19, 2020
There has never been a more affordable time to secure a home mortgage.
Mortgage rates have been extremely competitive in recent months, but they've now reached a new milestone.
According to data from Freddie Mac, the average interest rate on a 30-year mortgage has hit a new record low. Freddie Mac has been tracking mortgage data since 1971, which means there hasn't been a more affordable time to secure a 30-year mortgage in the last 49 years.
As exciting as this is for homebuyers and those considering a refinance, this is actually the 10th time that mortgage loans have hit a new low in recent months. It is unclear if rates will continue to plummet further or if this 10th record-breaking average marks the bottom.
A 30-year mortgage has never been this affordable
Freddie Mac's data shows that mortgage rates on a 30-year mortgage averaged just 2.81% for the week ending Oct. 15, 2020. This is down from 2.87% last week and reflects a dramatic decline from the 3.69% it was at this time last year.
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The Ascent uses a slightly different methodology to track rates, but our data also shows that average rates have been falling in recent days, and not just on 30-year loans. The average interest rates on fifteen year mortgage loans have also fallen dramatically compared with historical averages.
With fixed-rate loans, the interest rate is locked in. That means borrowers who can secure a loan at today's rates will keep their repayments low for the life of the loan. In fact, the principal and interest payment on a 30-year fixed-rate loan at last year's average rate of 3.69% would total $460 per month per $100,000 borrowed. In contrast, the monthly payment would fall to $411 per $100,000 in debt at today's average rate.
Unprecedented low rates don't benefit everyone
While affordable rates make it an opportune time to secure a mortgage loan, this is not an option for everyone.
Unfortunately, house prices have been driven up by low inventory and high demand, leading to bidding wars on many properties. Some would-be homeowners have been priced out by rising property values. If you can't find a house to buy, it doesn't matter if you could qualify for an affordable mortgage.
Lenders, driven by concerns about economic uncertainty due to COVID-19, have also tightened their standards. This has made it especially difficult for first-time buyers, self-employed buyers, and buyers with lower credit scores to get approved for mortgage loans.
Still, those looking to purchase a home at today's low rates should not give up. Nor should would-be refinancers who could substantially reduce their monthly payments and total interest costs. There are possible mortgage lenders, including online lenders, so it's well worth shopping around.
Aim to get pre-approval from at least three different mortgage lenders to compare rate quotes and terms. And if you're turned down by one lender or not offered a loan at today's competitive rates, try another.
With rates hitting new record lows for the 10th time, it's well worth putting in the effort to try to find a home loan. The opportunity to borrow for a home at such an affordable cost may never come round again.
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