Mortgage rates are lingering near record lows, according to a popular survey, which means major savings are still available for borrowers.
Rates have hit an all-time low 11 times since the pandemic began in March, and now sit almost a full percentage point lower than at this time last year.
The low-interest climate is giving homebuyers immense purchasing power, according to experts, and is contributing to record-setting home sales.
Historically low rates are also attracting a fury of refinance requests, as homeowners seize opportunities to slash their monthly mortgage payments and their lifetime interest costs.
Ultra-low rates hang around
Mortgage rates ticked up just slightly in the week ending Oct. 29, averaging 2.81% for a 30-year fixed-rate loan, from the previous week’s record low 2.80%, mortgage company Freddie Mac said on Thursday.
Rates are a stunning 97 basis points below where they were a year ago, when the average was 3.78%.
“The record low mortgage rate environment is providing tangible support to the economy at a critical time, as housing continues to propel growth,” says Sam Khater, Freddie Mac’s chief economist.
This has been an “essential ingredient” in the record pace of homes sales, says Realtor.com chief economist Danielle Hale. The demand is causing home prices to rise sharply, but the low interest rates have kept some buyers from being priced out of the market.
“For context, today's buyer of a median listing-price home is paying roughly $20 less per month than last year's buyer despite that home costing $35,000 more,” Hale says.
Rates on other popular mortgages also are holding fairly steady, the Freddie Mac survey shows. The average for a 15-year fixed-rate mortgage dropped to an all-time-low 2.32%, from 2.33% a week earlier. These mortgages, often used for refinance loans, remain in another orbit from last year, when the average was 3.19%.
Rates on 5/1 adjustable-rate mortgages, or ARMs, are averaging 2.88%, up slightly from 2.87% in the previous week but still way down from last year’s 3.43%.
Refinances remain very attractive
With rates so low, refinancing is booming. The Mortgage Bankers Association said Wednesday that refi applications are up an eye-popping 80% compared to this time last year.
“Many consumers are smartly taking advantage of the ability to lower their monthly payment, which means they can spend, save or pay down debt more so than they have in the past,” adds Freddie Mac’s Kan.
Homeowners who have been procrastinating should lock in the best rates while they can, because an incoming fee on mortgage refinancing could push refi rates higher.
Freddie Mac and Fannie Mae — the government-sponsored mortgage giants that buy most U.S. home loans from lenders — say COVID-19 has forced them to institute the fee to offset their pandemic-related losses. Some lenders already have raised their rates to pass along the 0.5% surcharge to consumers.
An estimated 19.3 million mortgage holders could lower their interest rates enough to reduce their monthly payments by an average $299 a month, mortgage data firm Black Knight recently reported.
You’ll land an ultra-low mortgage rate by shopping around; borrowers who get five rate quotes save an average of $3,000 more than those who get just one quote, a Freddie Mac study found.
If you wait too long and miss out on rock-bottom record low rates, you’ll have to find savings elsewhere. That could mean doing some additional comparison shopping to make sure you’re paying the lowest rate possible on your homeowners insurance.