KEY POINTS

  • The 30-year rate is the lowest in 50 years. 
  • A Zillow economist calls the record "a tremendous benchmark."
  • The low rate, though, hasn't upped home sales. 

The 30-year fixed-rate mortgage has dropped below 3% for the first time in a half-century, the Federal Home Loan Mortgage Corp. said Thursday.

The 30-year rate stood at 2.98% for the week ending July 16, down from 3.18% this time a year ago, according to the agency, better known as Freddie Mac. In Januar, the average rate was at 3.72%.

The 15-year fixed-rate mortgage is down as well -- to 2.48%. A year ago, the rate averaged 3.23%.

And the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.06%. At this time last year, the 5-year adjustable-rate mortgage averaged 3.48%.

“The drop has led to increased homebuyer demand and, these low rates have been capitalized into asset prices in support of the financial markets,” said Sam Khater, Freddie Mac’s chief economist.

But Khater cautioned the “countervailing force for the economy has been the rise in new [COVID-19] virus cases which has caused the economic recovery to stagnate, and this economic pause puts many temporary layoffs at risk of ossifying into permanent job losses.”

Zillow Group economist Jeff Tucker called the below-3% rate a “tremendous benchmark.”

“It’s also an indication that we remain in a crisis here,” Tucker added.

Mortgage rates typically move in the same direction as the yield on the 10-year Treasury note. Yields fall as bond prices rise, indicating nervous investors are moving into safe-haven assets like bonds.

Tucker noted that the spread between the Treasury yield and the 30-year rate has narrowed, mostly because lenders had the spare capacity to process applications after clearing a backlog of refinancings.

Still, low mortgage rates haven't increased home sales. Existing home sales dropped by 9.7% in May after a 17.8% plunge in April, according to the National Association of Realtors.

A pick-up, though, could be on the way. Mortgage purchase applications climbed in June about 17% on a year-over-year basis, according to the Mortgage Bankers Association.

Economists at Fannie Mae predict sales will peak in July or August as the backlog of postponed spring deals clear out.

In late May, new homebuyers Phillip and Tracy Caldwell received a 3% rate on a house in St. Louis.

“A big factor… was that mortgage rates were going down,” Caldwell told The Wall Street Journal. “We thought it might behoove us to get it done now.”

College professor Tressie McMillan Cottom landed a 3.05% rate to buy a house in Chapel Hill, N.C.

"It meant I could look at a higher price point and more homes became available,” she said. “On my second trip to Chapel Hill, I just came with my checkbook and told my agent ‘we’re picking one of these.’”

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