New Record Low Mortgage Rates Bring Buyers Relief

September 11, 2020
House figurine with dropping line chart
By Tyler Olson

Mortgage rates hit another new low this week, according to Freddie Mac. For 30-year fixed-rate mortgages, the most common type of loan, interest rates dropped to an average of 2.86% reports This rate beats out the previously lowest average rate for the week ending August 6, which was 2.88%. This is especially good news for buyers who are seeing home prices rise. Median home prices hit a record high last month and experienced a year-over-year increase of 10.8%. 
Even the smallest percentage point drops can help more prospective buyers afford a home.

While a percentage point here or there may not sound like much, it can determine whether aspiring buyers can afford homeownership. It can also add up to some very big savings. Even a single percentage point difference has the potential to shave more than $100 off a monthly mortgage payment and can even result in tens of thousands of dollars of savings over the life of a 30-year loan in some cases. (The exact amount will vary based on the rate and size of the loan.)

Last year, rates were about 70 basis points higher, at 3.56% for a 30-year fixed-rate loan in the week ending Sept. 12, according to Freddie Mac. (A basis point is equivalent to 0.01%.) Investors have been buying up more mortgage-backed securities, widely considered a safer investment, in response to the pandemic, and that's pushed mortgage rates lower.

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