The average rate on the key 30-year fixed rate mortgage fell to 2.98%, the lowest rate available in over 50 years, mortgage buyer Freddie Mac said Thursday.
What Happened: Mortgage rates are often tied to government bonds. Along with low interest rates, yields on the 10-year Treasury note have steadily declined from the start of the year, with yields down from 1.9% at the beginning of 2020 to around 0.6%.
Low rates are beneficial to both home buyers and those looking to refinance.
Why It’s Important: Homebuyers are already taking advantage of low rates. During May, pending home sales increased 44.3%, according to the National Association of Realtors.
CoreLogic reported that over 2 million Americans refinanced their homes between January and April. Expect this number to increase as rates continue to hit new lows.
Shorter-term home loans such as five- and 10-year loans have also experienced a drop in rates, although not as large as 30-year fixed rates mortgages.
A 2.98% rate does not necessarily mean that will be the exact rate buyers or refinancers will be offered by lenders. Different lenders and bankers may have slightly different loan ARP depending on the loan type and other factors.
What’s Next: The Federal Reserve may continue to buy back Treasury and mortgage-backed bonds as a way to contain the economic fallout from COVID-19. If they continue these buybacks, expect rates to stay low.
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