Record low rates hang around
Mortgage rates have ticked up just slightly, averaging 2.81% for a 30-year fixed-rate loan, from last week’s record low 2.80%, mortgage company Freddie Mac said on Thursday.
Rates are a stunning 97 basis points lower than they were a year ago, when the average was 3.78%.
“The record low mortgage rate environment is providing tangible support to the economy at a critical time, as housing continues to propel growth,” says Sam Khater, Freddie Mac’s chief economist.
This has been an “essential ingredient” in the record pace of homes sales, says Realtor.com chief economist Danielle Hale. The demand is causing home prices to rise sharply, but the low interest rates have kept some buyers from being priced out of the market.
“For context, today's buyer of a median listing-price home is paying roughly $20 less per month than last year's buyer despite that home costing $35,000 more,” Hale says.
Rates on other popular mortgages are also holding steady this week, the Freddie Mac survey shows. The average for a 15-year fixed-rate mortgage has decreased to an all-time-low 2.32%, from 2.33% last week. These mortgages, often used for refinance loans, remain in another orbit from last year, when the average was 3.19%.
Rates on 5/1 adjustable-rate mortgages, or ARMs, are averaging 2.88%, up slightly from last week’s 2.87%, but still way down from last year’s 3.43%.
Lower your mortgage bills
With rates so low, refinancing is booming. The Mortgage Bankers Association said this week that refi applications are up an eye-popping 80% compared to this time last year.
“Many consumers are smartly taking advantage of the ability to lower their monthly payment, which means they can spend, save or pay down debt more so than they have in the past,” adds Freddie Mac’s Kan.
Homeowners who have been procrastinating should lock in the best rates while they can, because an incoming fee on mortgage refinancing could push refi rates higher.
Freddie Mac and Fannie Mae — the government-sponsored mortgage giants that buy most U.S. home loans from lenders — say COVID-19 has forced them to institute the fee to offset their pandemic-related losses. Some lenders already have raised their rates to pass along the 0.5% surcharge to consumers.
An estimated 19.3 million mortgage holders could lower their interest rates enough to reduce their monthly payments by an average $299 a month, mortgage data firm Black Knight recently reported.
You’ll land an ultra-low mortgage rate 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.
If you wait too long and miss out on rock-bottom record low rates, you’ll have to find savings elsewhere. That could mean doing some additional comparison shopping to make sure you’re paying the lowest rate possible on your homeowners insurance.