The average lender is offering a rate between 4.125 and 4.25 percent, with more aggressive lenders going to 3.875 percent for borrowers with pristine applications, according to Mortgage News Daily. The average rate was at 4.40 percent before the Federal Reserve's announcement Wednesday that it would not raise interest rates this year and that it would start buying bonds again.
"This is happening due to big picture reassessments of global economic growth, or lack thereof," said Matthew Graham, chief operating officer at Mortgage News Daily. "If the fears are validated, today's rates will be near the top of the range for quite a while--months at least, but possibly years."
The average rate jumped over 5 percent last November, but then fell off in December. That caused a nearly 12 percent monthly spike in sales of existing homes in February, deals that were likely signed in December and January.
Mortgage rates were lower in 2016 and 2017, which may have caused the huge surge in home values during those years. Buyers could afford to pay more with interest rates in the 3.5 percent range. The supply of homes for sale was also incredibly low, prompting more bidding wars.
With economic growth here in the U.S. in question and global growth clearly shrinking, interest rates could move even lower than they are now. Or not.
"Although our forecast still calls for mortgage rates to tick up higher later in the year to an average of 4.6 percent, the recent drop is great for prospective buyers on the search for a home this spring," said Mike Fratantoni, chief economist for the Mortgage Bankers Association. "The combination of lower rates – especially compared to last spring – and moderating home-price growth improves buyers' purchasing power and will hopefully translate to a somewhat faster pace of home sales than previously expected."