Mortgage Rates at Historic Lows: What It Means for the Mortgage Industry


Mortgage rates fell below 3% for the first time in history as the U.S. economy continues to struggle with the COVID-19 pandemic. Here is where those rates stand today and how the current situation has impacted the mortgage industry.

Mortgage Rates Fall to Record Lows

As of July 16, Freddie Mac reports that the average 30-year fixed-rate mortgage dropped to a record low of 2.98%, the lowest it’s been in nearly half a century. Only a week prior, that same rate was at 3.03%, and this drop marks the seventh rate reduction since March. At this time last year, the average 30-year fixed-rate was 3.81%, and it was 4.94% in November 2018.

Likewise, the average 15-year fixed-rate mortgage now sits at 2.48%, a 0.03% reduction from the prior week, and a 0.75% drop year-over-year. And the 5-year adjustable-rate mortgage now has an average rate of 3.06%, down from 3.48% last year.

Drivers Behind Falling Mortgage Rates

According to Danielle Hale, chief economist at, the factor that is driving interest rate fluctuations is the uncertainty surrounding this country’s economic outlook. Specifically, states and cities are attempting to jumpstart their economies in the midst of a pandemic that has proven to be terribly difficult to contain.

Mathew Speakman, an economist for Zillow, states that the markets are unsure whether the latest surge in COVID-19 cases creates more issues for the economy or if there is anything to be optimistic about on the horizon., which releases a weekly mortgage rate trend index, reveals that over half of the experts surveyed anticipate rates to remain stable in the short-term.


What Low Interest Rates Mean for the Mortage Industry

Lower interest rates continue to make homes more affordable for buyers. For example, on a $300,000 loan, the monthly payment on a 30-year fixed-rate mortgage (not including taxes and insurance) would be $1,262 this week compared to $1,400 this time last year.

Homebuyers who may have been sitting on the sidelines out of fear are more likely to take a closer look at the housing market thanks to these favorable rates. Further, existing homeowners are increasingly applying to refinance mortgages to take advantage of lower rates and payments.

According to data from the Mortgage Bankers Association, which measures total loan application volume, mortgage applications jumped 8% in the second week of July. The refinance index rose 10% and was 106% higher than the prior year. In fact, refinancings accounted for 63.2% of mortgage applications.

In a normal recession, low interest rates generally stimulate economic activity. But, thanks to COVID-19, this isn’t a normal recession.

While borrowers are benefiting from these historically low interest rates, it’s unclear how mortgage lenders will fare in this uncertain market. With so much economic uncertainty, lenders are assuming more risk and should be pricing accordingly.

In the meantime, upwards of 25 million Americans remain unemployed, and the pandemic unemployment assistance benefits and other emergency lifelines are scheduled to run out at the end of July.