Rates find new depths

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Mortgage rates have hit an all-time low for the second week in a row, and for the 11th time since the pandemic began in March, mortgage company Freddie Mac said on Thursday.

Rates for a 30-year fixed-rate home loan are averaging 2.80%, a tick down from last week’s 2.81%, and almost a full percentage lower than this time last year, when rates stood at an average 3.75%.

“Mortgage rates remain very low, providing homeowners who have not already taken advantage of this environment ample opportunity to do so,” says Sam Khater, Freddie Mac’s chief economist.

Even against the backdrop of an unrelenting shortage of houses on the market, sales of existing single-family homes rose in September at their fastest annual rate since 2010, the National Association of Realtors reported on Thursday.

“Low mortgage rates are enabling buyers to tackle higher home prices and secure a place of their own, with a largely fixed monthly cost,” says Realtor.com chief economist Danielle Hale.

“Greater buyer and, perhaps more importantly, seller confidence also helped boost home sales activity this month,” she adds.

The Freddie Mac survey shows rates on other popular mortgages also have dipped. The average for a 15-year fixed-rate mortgage has declined to 2.33%, from 2.35% last week. Rates on those mortgages, often used for refinance loans, remain just a fraction of what they were a year ago, when the average was 3.18%.

Rates on 5/1 adjustable-rate mortgages, or ARMs, are averaging 2.87%, down from last week’s 2.90%, and way down from last year’s 3.40%.

Homeowners still have opportunities to save thousands

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“Low- and moderate-income borrowers who purchased during the last few years stand to benefit by exploring refinancing to lower their monthly payment,” says Freddie Mac’s Khater.

Overall refi requests shot up this week, according to the Mortgage Bankers Association, with applications for those loans up an eye-popping 74% compared to a year ago.

But many homeowners are still holding back. An estimated 19.3 million mortgage holders could refinance and lower their interest rates enough to reduce their monthly payments by an average $299, according to research from the mortgage data firm Black Knight.

Borrowers who procrastinate risk missing out on savings, because a new 0.5% fee on refinance loans may lead to a hike in refi rates.

Freddie Mac and Fannie Mae — government-sponsored mortgage giants that buy most U.S. home loans from lenders — say they need the fee to offset losses related to the pandemic.

That means good refi candidates — those with a solid credit score and at least 20% home equity — need to hurry to lock in the best rates before the new fee officially goes into effect on Dec. 1.

A Freddie Mac study found if you shop around to five lenders, you'll pay an average of $3,000 less over time than someone who seeks out only one mortgage offer.

Those same comparison shopping skills come in handy when you buy or renew your homeowners insurance, so you’ll get the right coverage at the lowest possible price.

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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