Experts predicted that mortgage rates would fall at the beginning of the coronavirus pandemic, but none could have predicted that rates would drop below 3% for the first time ever.
On July 16, 2020, the 30-year fixed rate mortgage rate hit 2.98% according to Freddie Mac. This is the first time that rates have dropped before 3% since 1971, when Freddie Mac began tracking mortgage rates. It’s also the seventh time so far this year that the organization has reported a record low. On August 6, 2020, experts saw an even more historic drop with rates reaching 2.88%, marking yet another historic low.
This new record low may motivate many more to hit the market. Both renters and current homeowners thinking of making a move can reap the benefits of low rates. Benefits translate to long-term savings for buyers—they may qualify for larger loans, affording an expanding budget for their home search. They can also keep their budget the same and simply enjoy lower monthly mortgage payments.
If you’ve been on the fence about buying, consider the following:
A homeowner who takes out a $200,000 mortgage at the current 2.88% rate stands to save $33,304 over the lifetime of the loan as compared that the same homeowner who locked in the 3.72% rate six months ago.
This is a boon for sellers as well, who will benefit from growing buyer demand and increased budgets of potential buyers. Sellers are finding that lower housing inventory has led to incredible competition for homes on the market. Realtors are reporting frequent competitive offers—including bidding wars—for the most desirable properties. Historically low interest rates may seem like a benefit to buyers only, but sellers are also reaping the rewards.
Typically, in times of crisis, like the country’s current battle against coronavirus, interest rates will dip. While it may seem counterintuitive, an improvement in the health crisis, like a drop in cases or the promise of a vaccine, rates will likely begin to creep back up. If you have considered buying or selling, current market conditions are favorable to a high return on your real estate investment.