US mortgage rates have dropped to another all-time low. Can they go even lower?

US mortgage rates have dropped to another all-time low. Can they go even lower?
US mortgage rates have dropped to another all-time low. Can they go even lower?US mortgage rates have dropped to another all-time low. Can they go even lower?
US mortgage rates have dropped to another all-time low. Can they go even lower?

Mortgage rates keep rewriting the record books. Mortgage giant Freddie Mac says rates on 30-year fixed-rate mortgages dropped this week to an all-time low in its survey that goes back nearly 50 years — and it’s the fourth time that’s happened since early March.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Freddie Mac says the typical 30-year rate has dipped to 3.13%, but a survey of lenders from Mortgage News Daily found that average rates plunged below 3% for the first time ever earlier this month.” data-reactid=”24″>Freddie Mac says the typical 30-year rate has dipped to 3.13%, but a survey of lenders from Mortgage News Daily found that average rates plunged below 3% for the first time ever earlier this month.

Will rates keep going down, down, down? As that classic toy, the Magic 8 Ball, says, “Signs point to yes” — but experts say don’t take ultra-low rates for granted.

The case for even lower rates

Miniature wooden houses and a red arrow down. The concept of low mortgage rates.Miniature wooden houses and a red arrow down. The concept of low mortgage rates.
<figcaption class="C($c-fuji-grey-h) Fz(13px) Py(5px) Lh(1.5)" title="Andrii Yalanskyi / Shutterstock” data-reactid=”34″>

Andrii Yalanskyi / Shutterstock

Long-term mortgage rates take their cues from the interest on Treasury bonds. Those yields are so spectacularly low that personal finance celebrity Suze Orman said in a recent podcast that “you have to be crazy, if you ask me, to be in bonds at this point in time.”

The yields slid this week and bond prices jumped on reports of rising coronavirus cases in many parts of the U.S. Investors were left worrying about the economy’s ability to recover anytime soon, explains Matthew Speakman, an economist with Zillow.

“This sparked a sell-off in stocks and a flight to the safe haven of bonds — something that normally pushes mortgage rates lower,” Speakman says.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In a new forecast, mortgage company Fannie Mae expects average 30-year mortgage rates will keep dropping, to 3.0% by the end of this year and to just 2.9% during all of 2020.” data-reactid=”41″>In a new forecast, mortgage company Fannie Mae expects average 30-year mortgage rates will keep dropping, to 3.0% by the end of this year and to just 2.9% during all of 2020.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Fannie Mae chief economist Doug Duncan says extremely cheap mortgage rates will continue to please homebuyers — and homeowners looking for refinance savings.” data-reactid=”42″>Fannie Mae chief economist Doug Duncan says extremely cheap mortgage rates will continue to please homebuyers — and homeowners looking for refinance savings.

“We … expect the extremely low mortgage rate environment to contribute to historically high levels of refinancing activity as household balance sheets and incomes improve,” Duncan says, in a news release.

During appearances before Congress this week, Federal Reserve Chairman Jerome Powell promised that the Fed would continue to hold its benchmark interest rate near zero as he raised new alarms about the economic threat from the coronavirus. The Fed’s ultra-low rates are helping to keep mortgage rates in the cellar.

The potential for rising rates

Up and down elevator buttons with up-button lighten upUp and down elevator buttons with up-button lighten up
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Maxfromhell / Shutterstock

Freddie Mac also has come out with a new mortgage rates outlook, but it’s not quite as tantalizing as Fannie Mae’s.

Though Freddie Mac chief economist Sam Khater says rates “should remain at record lows for the foreseeable future,” the forecast predicts 30-year rates will average 3.4% this year and 3.2% in 2021.

In the near term, we may have reached a turning point for mortgage rates, says Zillow’s Speakman.

“More bad news regarding the uptick in coronavirus cases would likely send rates back downward, possibly to new lows. However, rates could just as easily begin to trend upward again, particularly if key economic data or measures to contain or treat the virus show meaningful improvements,” he says.

That means if you’re thinking about buying a home or refinancing, don’t try to “time the market” and wait for the perfect mortgage rate, because rates could easily move in either direction.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Compare rates from a bunch of lenders, and if you find one that looks remarkably low and would work well for you, apply for the loan and work with the lender to lock the rate — so it doesn’t slip from your grasp.” data-reactid=”66″>Compare rates from a bunch of lenders, and if you find one that looks remarkably low and would work well for you, apply for the loan and work with the lender to lock the rate — so it doesn’t slip from your grasp.

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