The average cost of a 30-year fixed-rate mortgage dropped to a new record low of 2.81 percent, according to Freddie Mac. The previous record in the mortgage giant’s survey was 2.86 percent, reached in September.
It was the 10th time this year that Freddie Mac has reported a new record low for mortgage rates. With the U.S. economy in recession because of the coronavirus pandemic, mortgage rates have plunged.
In a separate survey of rates by Bankrate, the average 30-year fixed-rate came in at 3.05 percent, settling again at its lowest score. The gap with Freddie Mac’s number is because Bankrate’s figure includes points and origination fees averaging 0.34 percent, while Freddie’s number excludes those costs. Freddie Mac said its average is accompanied by an average of 0.8 of a point.
“Low mortgage rates have become a regular occurrence in the current environment,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “As we hit yet another record low, the 10th record this year, many people are benefitting as refinance activity remains strong. However, it’s important to remember that not all people are able to take advantage of low rates given the effects of the pandemic.”
Record drop in economic activity drives rates down
In a U.S. economy hit hard by COVID-19 shutdowns, bright spots are rare. Many sectors are beginning to bounce back, but the recovery has been uneven. However, the real estate industry is one of those rare bright spots, thanks largely to the ongoing low interest rate trend. But home prices are still advancing at a rapid pace.
The S&P CoreLogic Case-Shiller index of home prices in 20 U.S. cities jumped 3.9 percent in July from a year earlier, the biggest one-month rise since 2018. Ultra-low rates and a lack of inventory have pushed prices up all over the country.
Mortgage rates are low partly because of Federal Reserve policy. The Fed said it plans to hold interest rates steady at near zero and for several more years.
More than half of the mortgage experts polled by Bankrate this week expect remain the same next week.
“Flat,” said Joel Naroff, president and chief economist at Naroff Economic Advisors. “Waiting for the election.”