30-year mortgage rate drops to 2.99%
But potential homebuyers find rising prices, scarce selections, loan restrictions
WASHINGTON — U.S. average rates on long-term mortgages declined this week, remaining near historic lows as the key 30-year loan slipped back below 3%.
According to the latest data released Thursday by Freddie Mac — the Federal Home Loan Mortgage Corp. — the 30-year fixed-rate average slipped to 2.99% with an average 0.8 point. (Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.)
The rate was 3.01% a week ago and 3.75% a year ago. It is just the second time the 30-year fixed rate has fallen below 3%. It was 2.98% two weeks ago.
The average rate on the 15-year fixed-rate mortgage fell to 2.51% from 2.54% last week.
Homebuying demand continues as one of few bright spots in the economy, with the recovery stagnating and economic indicators pointing to slow growth and possible persistent high unemployment, Freddie Mac said.
The government reported Thursday that the economy shrank at a 32.9% annualized rate in the April-June quarter, when the coronavirus outbreak shut down businesses and threw tens of millions out of work. It was the steepest drop in the gross domestic product in records dating to 1947.
As the virus has surged in the South and West in recent weeks, many states have halted plans to reopen businesses, and millions of consumers have delayed any return to traveling, shopping and other normal economic activity. In yet more evidence of deepening economic pain, the government reported that more than 1.4 million laid-off Americans applied for unemployment benefits last week.
Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders across the country to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers who tend to have strong credit scores and large down payments. These rates are not available to every borrower.
Low rates fueled the revival of the housing market after the 2007-2009 recession. But lately they have been a source of frustration. Homeowners want to refinance but struggle to reach banks and lenders because of how busy they are. Homebuyers want to take advantage of the low rates, but the few number of homes on the market are driving up housing prices and making selections scarce.
And as attractive as these rates are to borrowers, few can obtain them. Many lenders are putting restrictions on loans, particularly if a borrower wants a cash-out refinance or jumbo loan or has a poor credit score.
At its meeting this week, the Federal Reserve held firm on interest rates and its bondbuying program. Even though the Fed didn’t change its benchmark rate, mortgage rates still fell. That’s because the central bank doesn’t set home loan rates. But its decisions influence them.
The government reported Thursday that the economy shrank at a 32.9% annualized rate in the April-June quarter, when the coronavirus outbreak shut down businesses and threw tens of millions out of work.