Mortgage Rates Slide Again and Head Toward All-Time Lows

Doug Whiteman
Mortgage Rates Slide Again and Head Toward All-Time Lows

Mortgage rates that had been sitting on the slopes have gone back on their downhill course this week — possibly on their way to record territory.

“Rates fell to the lowest level in three months and are about a quarter point above all-time lows,” said Sam Khater, chief economist with Freddie Mac, in a statement on the mortgage giant's latest weekly survey.

If you're shopping for a home or are thinking about a refinance, you might compare mortgage rates and find you have the perfect opportunity to save serious money on interest.

Mortgage rates close in on all-time lows

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Mortgage rates are falling.

Mortgage rates have dropped this week, with 30-year fixed-rate mortgages averaging 3.60% — down from 3.65% a week ago, Freddie Mac reported Thursday. Last week, rates were little changed.

The 30-year average is the lowest since early October and is moving closer to the record-low of 3.12% reached in November 2012.

One year ago, 30-year fixed mortgage rates were nearly a full percentage point higher, at an average 4.45%.

Rates remain the lowest for January in seven years, MoneyWise.com has found, by reviewing Freddie Mac's historical data.

Analysts say mortgage rates are going down because investors keep finding new things to worry about and continue putting their money into Treasury bonds as a safe haven. The latest source of worry is the spread of the deadly coronavirus, apparently from China.

Demand for Treasuries pushes their prices higher and their yields, or interest rates, lower — and mortgage rates tend to follow.

Low rates fuel a turbocharged housing market

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Low rates are making for a busy winter of homebuying.

Today's attractive mortgage rates are making houses a hot commodity during the cold-weather months, Khater says.

“The very low rate environment has clearly had an impact on the housing market as both new construction and home sales have surged in response to the decline in rates, the rebound in the economy and improving financial market sentiment," he says.

The government reported last week that groundbreakings for new houses skyrocketed nearly 17% in December to the highest pace in 13 years, and the National Association of Realtors says sales of previously owned homes jumped 3.6% last month and were the strongest since early 2018.

Though mortgage applications slipped last week, the Mortgage Bankers Association says they're still coming in at an "elevated" level. Applications for mortgages to buy homes are running 8% higher than a year ago, and refinance activity is more than double what it was in January 2019.

Freddie Mac has said that homeowners who refinaced last spring are now saving $140 a month, on average, or $1,700 a year. Learn more about whether a refinance might be the right move for you.

Homebuyers are finding a few big challenges: tight supplies of houses and rising prices. The Realtors say the availability of homes is the lowest they've ever seen, and home prices jumped 7.8% last year — the biggest annual increase in nearly four years.

The outlook for mortgage rates and housing

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Buyers and homeowners should find low mortgage rates through at least the end of next year.

Mortgage rates are likely to stay at historically low levels, with 30-year fixed-rate mortgages averaging 3.7% throughout both 2020 and 2021, according to a forecast released this week by mortgage company Fannie Mae.

Those numbers would beat last year's average rate of 3.9%.

Doug Duncan, Fannie Mae's chief economist, tells MoneyWise.com there's no reason to panic if you see rates moving higher from one week to the next.

"Mortgage rates are likely to be somewhere in the 3.5% to 3.75% range for some time," he says. He recommends that prospective homebuyers draw up a budget and know what they can afford, so they'll be ready to pounce when they spot a rate they like.

Rates on home loans can change at any time, so it's wise to lock a good rate when you see one so it won't get away.

Other mortgage rates this week

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Homeowners are finding lower rates on 15-year refinance loans.

Rates on 15-year fixed-rate mortgages have slid to an average 3.04%, from 3.09% last week. Those loans are a popular choice for refinancing.

A year ago, 15-year mortgages were averaging 3.88%, Freddie Mac says.

And, rates on 5/1 adjustable-rate mortgages have tumbled this week. Those loans — known as ARMs — are fixed for five years and then can adjust up or down every year after that.

ARMs are currently being offered at an average initial rate of 3.28%, down from last week's 3.39%. Last year at this time, the starter rates on ARMs were averaging 3.90%.