If you're in the market for a home or a refi and you spot a rate you like, weigh the pros and cons of locking it — so it won't slip away.

Mortgage rates hover near levels last seen in 2016

Close up calendar of October 2016
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Rates are the lowest since the fall of 2016.

After tumbling for four straight weeks, mortgage rates are slightly higher this time. The benchmark 30-year fixed mortgage rate has inched up to an average 3.47%, from 3.45% last week, mortgage giant Freddie Mac reported on Thursday. The rates in the survey come with an average 0.7 point.

Last week's rates were the lowest since early October 2016 — and the best ever for February, MoneyWise.com discovered by reviewing Freddie Mac survey data going back to the spring of 1971.

Mortgage rates have been sliding, in an odd side effect from the coronavirus crisis. Worries about the economic risks have had investors jumping on board Treasury bonds as a safe place for their money. Federal Reserve Chairman Jerome Powell told Congress this week that the worsening outbreak could rock the global economy.

As demand for Treasuries goes up, the interest paid on those securities goes down — and so do mortgage rates. They tend to shadow the yield on 10-year Treasury notes.

Rates on 30-year mortgages have been getting close to the all-time low in the history of the Freddie Mac survey: 3.31%, reached in November 2012. A year ago, the average rate was nearly a full percentage point higher, at 4.37%.

Current average mortgage rates

Loan Type Interest Rate
30-year fixed-rate mortgage 3.49%
15-year fixed-rate mortgage 2.99%
5/1 adjustable-rate mortgage 3.25
Source: Freddie Mac Primary Mortgage Market Survey, Feb. 20, 2020.

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Low rates hook homeowners and homebuyers

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Homeowners are in a stampede to refinance.

The recent drop in mortgage rates has touched off a stampede to refinance, as homeowners realize they can chop their monthly house payments by swapping out loans at 4% interest or higher with new mortgages offering better deals.

You can compare refinance offers from multiple banks side by side, by visiting LendingTree.

"Refinance application activity is once again surging, rising to the highest level in seven years,” says Sam Khater, Freddie Mac's chief economist. "This surge coupled with strong purchase activity means that total mortgage demand remains robust, reflective of a solid economic backdrop and a very low mortgage rate environment."

Last month was the strongest January for mortgage "purchase loans," to buy homes, since 2009, the Mortgage Bankers Association says.

But many first-time homebuyers are missing the party, as much as they would love to nail down a low mortgage rate.

"It can be challenging to find a home they can afford, or to know how much home they can afford," says D. Steve Boland, the head of consumer lending at Bank of America. "In fact, a common mistake is starting to window-shop houses before understanding the market and how much one can afford."

Plug one of today's low mortgage rates into the calculator below to see just how much mortgage you can handle.

How low will mortgage rates go?

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Rates have fallen sharply from a year ago.

You can expect mortgage rates to stay around historically low levels for the long haul. A recent forecast from Freddie Mac's sister company, Fannie Mae, said 30-year fixed-rate mortgages are likely to avearge 3.7% throughout this year and next. In 2019, the average was 3.9%.

Federal Reserve policymakers met late last month and decided to keep holding down their key interest rate — which should help hold mortgage rates down.

Boland says there's no need for homebuyers to rush into something they can't afford just because they're caught by the sparkle of a low mortgage rate. At the same time, he doesn't recommend putting off buying your dream home in hopes rates will go even lower.

"It’s never too early to start building equity and credit, and more importantly, starting the next stage of your life," he says. "Should you postpone your life or starting a family for the chance on a percentage point moving up or down? Probably not."

Take a look at today's best mortgage rates where you live.

Other mortgage rates this week

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Other mortgage rates are mixed.

Rates on 15-year fixed-rate mortgages are unchanged this week at 2.97%. Those loans are a popular refinancing option.

A year ago, 15-year mortgages were at an average 3.81%, Freddie Mac says.

And rates on 5/1 adjustable-rate mortgages have fallen, after moving higher last week. Those "ARMs" are fixed for five years and then can adjust up or down each year after that.

Right now, ARMs are being offered at an average initial rate of 3.28%, down from 3.32% last week. One year ago at this time, the starter rates on ARMs were averaging a sharper 3.88%.

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."