Rates are calm during a volatile time

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Mortgage rates have ticked down a notch this week to an average 2.87% for a 30-year fixed-rate loan, from last week’s 2.88%, mortgage company Freddie Mac said on Thursday.

Rates on the most popular mortgage have been fairly steady since reaching a record low 2.86% one month ago. Last year at this time, 30-year fixed-rate mortgages were averaging 4.60%

“The year-long slide in mortgage rates seems to be ending as rates have flattened over the last month and the economic rebound has slowed,” says Sam Khater, Freddie Mac’s chief economist.

The consistency in rates comes during a volatile stretch in Washington, which has included President Donald Trump's COVID-19 diagnosis, the approaching election and uncertainty over the next round of coronavirus relief.

Even the highest yields on Treasury bonds in more than three months haven't been able to bump mortgage rates. Matthew Speakman, an economist with Zillow, points out that while that would normally lift rates, they remain close to record territory.

“While the upward move in Treasurys does increase the likelihood of mortgage rates eventually moving higher, it appears that rates do have a bit of a buffer before they head in that direction,” he says.

A frustrating season for homebuyers

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Months of paltry mortgage rates have escalated home sales, even with a limited flow of new listings.

“The continued imbalance of housing demand versus supply lifted prices about 13% higher than last year, a scorching pace which is outstripping buyers’ wages and ability to keep up,” says George Ratiu, senior economist at Realtor.com.

The record low rates are no longer offsetting sky-high prices, adds Ratiu, causing affordability to take center stage.

New “purchase loan” mortgage applications dropped this week, according to a report from the Mortgage Bankers Association as entry-level buyers struggled with the higher prices.

The Freddie Mac survey shows that other popular mortgages also have barely moved this week. The average for a 15-year fixed-rate mortgage has inched up to 2.37%, from 2.36% last week. Rates on those mortgages, often used for refinance loans, are still at rock bottom compared to last year, when the average was 3.05%.

Rates on 5/1 adjustable-rate mortgages, or ARMS, are averaging 2.89%, down slightly from last week’s 2.90% and way down from last year’s 3.35%.

Refinance while you can

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Homeowners may not have much more time to score ultra-low mortgage rates.

An incoming fee on refinance loans could push refi rates higher this fall as more lenders pass the cost along to borrowers. So, owners need lock in great refinance rates while they still can.

An estimated 19.3 million mortgage holders could lower their interest rates enough to reduce their monthly payments by an average $299, mortgage data firm Black Knight recently reported.

Experts say a borrower who's determined to find the lowest rate available for their area and for someone with their credit score should gather and compare at least rate quotes from lenders.

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.

Even if rates do rise, you can use those expert comparison shopping skills 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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