Good news brings a spike in rates

Man walks past Pfizer building
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Mortgage rates are averaging 2.84% for a 30-year fixed-rate loan, up from last week’s all-time low of 2.78%, mortgage company Freddie Mac said on Thursday.

Even with the jump, rates are peanuts compared to this time a year ago, when 30-year loans averaged 3.75%.

Monday’s announcement from drugmaker Pfizer that its COVID vaccine has proven to be 90% effective was an unexpected revelation, says Matthew Speakman, an economist with Zillow.

"Bond yields jumped on the news,” Speakman says. “Mortgage rates followed suit, rising firmly in recent days." He adds that it’s a "stark reminder" that the pandemic — and our ability to fight it — will have a major influence on interest rates going forward.

Rates on other mortgages also increased this week, the Freddie Mac survey shows.

The average for a 15-year fixed-rate mortgage is 2.34%, up from 2.32% last week. These mortgages, often used for refinance loans, remain miles below last year, when the average was 3.20%.

Rates on 5/1 adjustable-rate mortgages, or ARMs, are at an average 3.11%, up from last week’s 2.89% but still far from last year’s 3.44%.

Millions still haven’t refinanced

Asian family are going out of the house , Parents and children were walking hand in hand together a happy in garden.
GP PIXSTOCK / Shutterstock

Homeowners are refinancing at a blazing pace, according to the Mortgage Bankers Association, with refi loan applications up 67% compared to a year ago.

But many are still watching from the sidelines.

Some 18.5 million mortgage holders are in a good position to refi and save around $300 monthly, the mortgage data firm Black Knight said last week. Good refinance candidates include those with solid credit scores and at least 20% equity in their homes.

Homeowners need to trade in their loans before interest rates rise in general, and before a new 0.5% fee on most U.S. refinances officially takes effect on Dec. 1. Lenders are likely to pass along the cost by raising their refi rates; many have already done that.

If you wait too long and miss out on a deeply cheap rate, you’ll need to find savings elsewhere. A little comparison shopping can help you find a lower price on your homeowners insurance that could save you more than $1,000 a year.

Low rates help combat higher home prices

Real estate open house sign on lawn in nice suburban neighborhood.
RebeccaPavlik / Shutterstock

Fueled by historically low mortgage rates, demand for homes is still raging.

But new listings are lagging, possibly related to rising coronavirus cases, according to a report from Realtor.com. The research also suggests that, though buyers have been waiting for signs of a slowdown, prices "continue to defy gravity."

Weary buyers waiting for the market to cool could miss out on ultra-low rates.

Mortgage News Daily’s survey of lenders showed a sizable jump in 30-year mortgage rates earlier this week. Even so, “this leaves rates in territory that's still great by historical standards,” wrote Matthew Graham, the publication’s chief operating officer.

He adds there are questions about where things go from here. With rates likely to inch higher in the coming weeks, it could be time to lock a lower rate while you can.

Experts say buyers should gather and compare at least five rate quotes to find the best deal — because rates can vary sharply from one lender to the next.

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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