Rates drift back down

Typical american neighborhood for middle class
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Mortgage rates have dropped slightly this week to an average 2.88% for a 30-year fixed-rate loan, from last week’s 2.90%, mortgage company Freddie Mac said on Thursday.

That’s just above the record-low 2.86% from three weeks ago. Last year at this time, 30-year fixed-rate mortgages were averaging 3.65%

“The overall consistency in mortgage rates is largely attributed to unanswered political questions — whether or not there will be another stimulus and what the upcoming presidential election could mean for markets,” says Danielle Hale, chief economist with Realtor.com.

But upward pressure on rates could come at any time, says Matthew Speakman, an economist with Zillow.

“The next test of this may be Friday’s September jobs report, which has the potential to surprise markets with good news — or bad,” he says.

A strong employment reading could push up the interest on Treasury bonds, and mortgage rates would likely rise, too.

The Freddie Mac survey shows rates on other popular types of mortgages also have dipped this week. The average for a 15-year fixed-rate mortgage has decreased to 2.36%, from 2.40% last week. Rates on those mortgages, often used for refinance loans, are down sharply from last year, when the average was 3.14%.

Rates on 5/1 adjustable-rate mortgages, or ARMS, are averaging 2.90%, unchanged from last week but down considerably from last year’s 3.38%.

Low rates make home sales soar

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Favorable mortgage rates are continuing to pump up home sales, even while the inventory of houses for sale reaches new lows.

The number of homes on the market was down 39% year over year in September, according to Realtor.com. The U.S. median home price is up more than 11% compared to last year.

“We’re seeing potential homebuyers who now have more purchasing power and many current homeowners who have the option to refinance their loan for a better rate,” says Sam Khater, Freddie Mac’s chief economist.

"However, several factors could disrupt this activity including high home prices, low inventory and lender capacity," he says.

A report from the Mortgage Bankers Association suggests lenders may already be at capacity in the amount of business they can handle.

But Realtor's Hale says rates will most likely remain deeply low for the next few months, which will help homebuyers counter the rising prices.

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Lock in low rates while you can

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An incoming fee on mortgage refinancing could push rates higher later this fall.

We saw a preview in mid-August, as rates soared when the 0.5% fee was first announced for Sept. 1. When a federal regulatory agency delayed it by three months, rates dropped back down.

But experts already have observed lenders passing the cost on to consumers by raising refi rates. That means the time is now for homeowners to lock in the best rates for refinancing their mortgages. An estimated 19.3 million mortgage holders could lower their interest rates to reduce their monthly payments by an average $299 a month, mortgage data firm Black Knight recently reported.

Get the best mortgage rates by shopping around; borrowers who get five rate quotes save an average of $3,000 more than those who get just one quote, a Freddie Mac study found.

Take a look at today's top mortgage rates where you are:

About the Author

Ethan Rotberg

Ethan Rotberg

Reporter

Ethan Rotberg is a staff reporter at MoneyWise. His background includes nearly 15 years as a writer, editor, designer and communications professional. He loves storytelling, from feature writing to narrative podcasts. His work has appeared in the Toronto Star, CPA Canada and Metro, among others.

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