Mortgage rates continued on their downward spiral over the past week, this time, reaching an all-time low of 3.29%. That’s the lowest point on record, according to Freddie Mac, which started tracking rates in 1971. One year ago, rates on 30-year mortgages were at 4.41%—more than a full point higher than today’s averages.
Rates on other loan products are also dropping. On 15-year, fixed-rate loans, rates fell below 3% for the first time in three years, while 5/1 ARM rates hit 3.18%, another three-year low.
Mike Fratantoni, the senior vice president and chief economist for the Mortgage Bankers Association, says the rate drops are largely due to “increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility.”
On the back of these lower rates, overall loan applications were up 15.1%. Refinance activity surged 26% over the week and a whopping 224% since the same time a year ago, according to MBA. Refinances accounted for nearly two-thirds of all loan activity last week.
“Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize,” Fratantoni says.
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According to data firm Black Knight, there’s a lot of potential for this growth, too. At a 3.25% interest rate, 14.5 million high-credit homeowners could shave at least 0.75% off their mortgage rate by refinancing. If rates drop further to 3.125%, more than 17 million homeowners could save big.
Cash-out refinances also become an increasingly Chicago mortgage rates better deal as rates fall. Black Knight’s data shows that 76% of homeowners who used a cash-out refinance recently got to keep their same interest rate or even lower it, all while tapping their home equity in the process. A full quarter actually reduced their interest rate by 1% or more.
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Homeowners with mortgages originated in 2018, 2017, 2019, and 2014 claim the biggest swaths of potential refinance candidates, but those numbers are constantly changing as rates fluctuate.
“The population of refinance candidates remains extremely sensitive to even the slightest rate movements,” Black Knight reports. “Should recent downward pressure on the 10-year U.S. Treasury yields translate into further declines in the average 30-year rate, we could see refinance incentive hit a record high.”