Mortgage rates have been soaring over the last week, a daily survey shows, and the apparent reason is a new fee on refinance loans that's technically months away.
"The controversial program doesn’t officially go into effect until Dec. 1, but it appears that the price increase is already appearing as part of many lenders' quoted rates," says Matthew Speakman, an economist with Zillow.
Experts say you might still have time to score an ultra-low rate that doesn't reflect the new surcharge — like a 30-year mortgage that's currently advertised at 2.5% — but you'll need to be diligent and know how to shop around.
What's happening to mortgage rates?
In a week's time — from Monday Sept. 14 to the following Monday — the average rate for a 30-year fixed-rate mortgage jumped from 2.88% to 3.06%, according to Mortgage News Daily's survey of lenders.
"Any lender making a loan for a conventional 30-year fixed refinance will have to account for this fee, and most of them will be doing that before the end of this month," writes Matthew Graham, chief operating officer of Mortgage News Daily.
Rates have gone up across the board, even though the new 0.5% surcharge is supposed to apply only to refi loans. It was first announced in mid-August by Fannie Mae and Freddie Mac, giant government-controlled companies that buy or guarantee most U.S. mortgages, and at the time they said the fee would start Sept. 1.
Following an uproar — and a spike in mortgage rates — the fee was delayed a few months. But why is it pushing up mortgage rates now, when the new start date isn't until December?
People who follow the industry closely say backlogged lenders are allowing themselves plenty of time to process and close loans they'll sell to Fannie and Freddie in late fall, after the new charge arrives.
How you can still score a low rate
Some lenders are in no hurry to bake the new fee into their rates, including United Wholesale Mortgage, America's second-largest home lender after Quicken Loans.
"I said the earliest would be Oct. 1, but I don’t think it’s going to be that because we’re closing in 17 days, 15 days, 12 days," UWM's CEO Mat Ishbia told HousingWire.
Ishbia's company is still promoting a 30-year fixed-rate mortgage available for purchases and refinances with rates as low as 2.5%.
Do borrowers need to race to snap up the cheap mortgage rates before they're gone?
"It's never good to rush into a choice — especially with your mortgage," says Dan Green, founder and CEO of the mortgage lender Homebuyer. "That said, if you made your choice, commit to your lender immediately. Maybe you'll squeak in before the adverse market fee shows up in your price."
To find a rock-bottom rate, go online and compare mortgage offers from at least five lenders — so you'll have a good shot at turning up the best deal available in your area and for someone with your credit score.
That sort of comparison shopping works well for finding affordable homeowners insurance, too.
Danny Frio, branch manager at Preferred Rate in Oakbrook Terrace, Illinois, says he's advising clients "not to wait, and lock in now" — though not necessarily because of the fee.
Frio says mortgage rates may start moving in November, because of two big question marks: "1.) Coronavirus, with the addition of flu season on the horizon; and 2.) The election."