Mortgage rates close in on record territory
Mortgage rates have dropped to an average 2.91% for a 30-year fixed-rate loan, down from 2.99% last week, according to mortgage company Freddie Mac.
One year ago, the rates were averaging a steeper 3.58%. The loans in the Freddie Mac survey come with an average 0.8 point.
Rates are now just a couple of notches above their all-time low from early this month in the Freddie Mac survey, which has been tracking mortgage rates for nearly half a century. Thirty-year fixed-rate mortgages hit an average of just 2.88% on Aug. 6.
Less than a week later, mortgage rates jumped after a surprise announcement from Freddie Mac and Fannie Mae, which are government-sponsored mortgage giants that buy or back most U.S. mortgages. The companies said that starting Sept. 1, they'd charge a new 0.5% fee on refinance loans.
Lenders reacted by boosting their rates to begin offsetting the surcharge, which the Mortgage Bankers Association said would cost the average borrower an extra $1,400.
After protests from the mortgage bankers and others, the federal agency that regulates Fannie and Freddie said this week that it would put the fee on hold until Dec. 1.
And, mortgage rates came back down.
Low mortgage rates are appealing to homebuyers
The decline in mortgage rates comes at a perfect time for homebuyers, who are making up for time lost last spring when COVID-19 lockdowns were widespread.
It may be August but in the housing market it feels more like April or May, which are usually two of the most active months of the year for home sales, says Corey Burr, senior vice president at TTR Sotheby's International Realty in Chevy Chase, Maryland.
"Driven by low rates, low inventory, a recovering economy and a fundamental desire to live in a house and neighborhood that suits the new reality of primarily working from home, buyers are active," Burr says.
If you're thinking this might be your time to buy a home, or if you're a homeowner who needs to stop procrastinating and refinance already, you may need to move quickly — before that refinance fee starts having an impact on mortgage rates again.
Though it's been delayed until December, experts say the fee could begin driving rates higher as early as October, as lenders prepare for the implementation.
So, start shopping around for a bargain loan now. Get mortgage offers from at least five lenders and compare them, to find the lowest rate available to you.
Then, be sure to take the same approach with your homeowners insurance. When it's time to buy or renew your policy, go online and seek out rate quotes from several insurers to make sure you pay the best price for your coverage.
What other mortgage rates are doing
The latest Freddie Mac survey shows rates on other popular types of mortgages are mixed this week.
The average for a 15-year fixed-rate mortgage has dropped to 2.46%, from 2.54% last week. Fifteen-year mortgages are a popular choice for refinance loans, and the rates are down considerably from last yeat at this time, when the average was 3.06%.
Meanwhile, rates on 5/1 adjustable-rate mortgages, or "ARMS," are unchanged. The rates on those loans are fixed for five years, then can adjust up or down every year, depending on what other interest rates are doing.
ARMs are currently being offered at starter rates averaging 2.91%, same as last week.
At this time in 2019, the typical initial rate on a 5/1 ARM was 3.31%.
Take a look at today's top mortgage rates where you are: