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 Realtor.com. 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.