Mortgage rates have fallen to another record low for the ninth time this year since March. This is according to the Primary Mortgage Market Survey, a weekly survey of rates from Freddie Mac. The 15-year fixed-rate mortgage dropped to 2.35% while the average rate on a 30-year fixed-rate mortgage fell to 2.87%. That is the lowest level in nearly 50 years. The mortgage giant began collecting data in 1971.
“Mortgage rates have hit another record low due to a late summer slowdown in the economic recovery,” said Sam Khater, Freddie Mac’s chief economist. “Heading into the fall, it will be difficult to sustain the growth momentum in purchases because the lack of supply is already exhibiting a constraint on sales activity,” he added.
Purchase activity remains strong according to Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting. Applications for new mortgages were up almost 3% earlier this month. The average loan size continued to grow, reaching $368,600, the highest since the Mortgage Bankers Association began tracking in 1990.
With unusually high buyer interest this late in the homebuying season, buyers are moving much faster than this time last year to beat out competition and lock in low mortgage rates. The national median listing price on Realtor.com was $350,000, up 10.1 percent year-over-year while prices rose 8.9 percent in larger markets. While rising prices are making sellers happy, the buyers are worried as home prices rose during the lockdown and could rise even further due to heavy buyer competition and a big shortage of supply.
“Home buyers continue placing offers on homes, pushing existing inventory toward historic lows,” George Ratiu, Realtor.com’s senior economist, told CNN. “Would-be sellers are stuck in their homes, struggling to find their next house amid a dearth of supply, further contributing to the decline in inventory.
“The market imbalance is pushing prices close to 11% higher compared to a year ago, an advance which is beginning to erode the benefits of lower mortgage rates,” Ratiu continued. “For many young, first-time buyers, the shift is reducing affordability, just as they are ready to embrace homeownership.”
The new record low interest rate is also having an impact on refinancing existing loans. According to mortgage data company, Black Knight, there are 19.3 million high-quality refinance candidates. The firm reported that this is the largest group of this kind there has ever been. It represents 43% of all 30-year mortgage holders. The high-quality refinance candidates are defined by Black Knight as 30-year mortgage holders who are current on their mortgage payments, have credit scores of 720 or higher who hold at least 20% equity in there homes, who stand to shave at least 0.75% off their mortgage rate by refinancing.
Buying activity slowed due to the pandemic but has significantly rebounded in the past few months. Despite the recession, the very low mortgage environment has spurred many first-time homebuyers to jump into the real estate market and has come at a very critical time for the economy.