Borrowing money to buy or refinance a home this fall could never be this affordable again, experts say.
10/26/20 ?? On October 22nd, home loan interest rates fell to a new all-time low of 2.8 percent across the country for 30-year fixed-rate loans, the lowest ever recorded by Freddie Macs Primary Mortgage Market Surveywhich dates from 1971.
?? Mortgage rates today are on average more than a full percentage point lower than the rates for the past five years. ?? written down Sam Khater, Freddie Mac’s chief economist. ?? This means that most low- and middle-income borrowers who have bought in the past few years can benefit from considering refinancing to lower their monthly payment. ??
The low interest rates also mean that Chicago home buyers may now have the golden opportunity to secure the lowest mortgage rates in 50 years, provided they have a good job, cash down payment, and solid credit history.
The average 30-year benchmark fixed rate mortgage fell 2.8 percent in the week ended October 22, from 2.81 percent the week before. A year ago, the 30-year average of fixed-rate loans was 3.75 percent.
Fifteen-year fixed loans averaged 2.33 percent on October 22, compared with 2.35 percent the week before. A year ago, the 15-year fixed loans averaged 3.18 percent.
The comprehensive Freddie Mac survey focuses on conventional, compliant, and fully amortizing home loans for borrowers who pay a 20 percent down payment and have excellent credit.
On October 23, Mutual of Omaha Mortgage hit a low of 2.843 percent on 30-year fixed rate loans and 2.625 percent on 15-year fixed rate loans, RateSeeker reported.
As part of an aggressive loan program with pledged money market funds, the Huntington Bank listed 2.2 percent for a seven-year jumbo adjustable-rate mortgage (ARM) and 25 percent down payment, according to the mortgage broker Brian Bockholdt.
Before the sharp decline in interest expenses in 2020, mortgage rates last hit an all-time low on November 21, 2012, when the 30-year fixed mortgage average hit 3.31 percent, according to Freddie Mac’s archives.
Then came 2020, the year of the COVID-19 pandemic. On July 16, 2020, home loan interest rates slipped to 2.98 percent nationwide? What then was an all-time low. It was the first time in 50 years that home loan interest rates fell below 3 percent, Freddie Mac reported.
Since then, interest rates on 30-year fixed home loans have been below 3 percent. On August 27, 2020, the average rate was 2.91 percent after 2.99 percent the week before.
To support the economy during the pandemic, the Federal Reserve plans to keep interest rates near zero even if inflation surpasses its two percent level.
This means that loan rates on mortgages, auto loans, and business loans are likely to remain extremely low for years to come.
Mortgage interest rate history
Archives of the now-defunct Federal Housing Finance Board show that long-term mortgage rates were not much higher in the 1960s than they were in the Great Depression, when lenders charged five percent for five-year balloon loans.
Five decades ago, between 1963 and 1965, you could get a mortgage of 5.81 to 5.94 percent. Between 1971 and 1977, the now defunct Usury Law of Illinois kept interest rates in the 7.6 to 9 percent range.
In the early 1980s, runaway inflation caused home loan interest rates to skyrocket. According to Freddie Mac, benchmark 30-year mortgage rates peaked at a staggering 18.45 percent during that great recession in October 1981.
Interest rates finally fell below 10 percent in April 1986 and then rebounded in the eighties’ balance sheet in the 9-10 percent range. 21 years ago ?? in August 1999 when many of today’s millennial borrowers were in high school? Lenders gave 8.15 percent for a 30-year fixed-rate mortgage. It seemed like good business at the time.
However, interest rates began to fall gradually over the past decade, falling to 3.31 percent on a 30-year fixed-rate mortgage in November 2012.
Then came 2020, which is likely to go down in the American book of real estate history as the year of rock bottom prices.