Mortgage rates have fallen for the third straight week, making refinancing an even more attractive proposition for the millions of US homeowners still sitting on older and more expensive loans.
Average rates on 30-year home loans fell below 3% last week to a new five-month low, according to a leading study. Today’s mortgage rates can provide the typical refinancing business hundreds of dollars in monthly savings, according to other new data.
30 year mortgage rate
The average interest rate on America’s favorite home loan, a 30-year fixed-rate mortgage, fell from 2.90% to 2.88% last week, according to mortgage giant Freddie Mac. reported on Thursday…
Rates are the lowest since the week of February 18, and a 30-year mortgage is even cheaper than a year ago, on some of the darkest days of COVID-19, when the average rate was 2.98%.
“Since a peak of 3.18% in April, mortgage rates have dropped by 30 basis points,” said Sam Hather, chief economist at Freddie Mac. A basis point is one hundredth of 1 percentage point.
Despite the ongoing recession, today’s rates are below 3% unlikely to last long, experts say. As the economy is recovering from the effects of the coronavirus crisis, it may only be a matter of time before the Federal Reserve begins to cut back on its pandemic management strategies, including keeping interest rates at historic lows.
“Homeowners and buyers shouldn’t be too relaxed thinking 30-year rates will stay below 3%,” Corey Burr, senior vice president of TTR Sotheby’s Real Estate, told MoneyWise. “They have to act now to refinance if it makes economic sense to them.”
Mortgage rates for 15 years
The average rate on 15-year fixed rate mortgages increased slightly from 2.20% to 2.22% last week. But 15-year loans are significantly cheaper than they were at this time last year, when the average was 2.48%.
IN low cost fixed rate mortgages corresponds to the low yield (interest rate) on 10-year Treasury bonds. Once these yields start to rise, mortgage fixed rates are likely to follow suit.
But one current Fed measure could help curb bond yields and mortgage rates. To support the economic recovery, the central bank is expected to buy at least $ 40 billion monthly in mortgage-backed securities, which are investments made up of packages of home loans.
“In short, the Fed believes there is still work to be done to get the economy back on track to keep mortgage rates low for the rest of the year,” said George Ratiu, senior economist at Realtor.com.
Freddie Mac just revised his forecast for 2021 and now expects 30-year fixed mortgage rates to average 3.1% for this year, up from 3.2% in April.
Adjustable Rate Mortgage 5/1
Rates on 5/1 adjustable rate mortgages, or ARM, averaged 2.47% last week last week, up from 2.52% a week earlier.
At the same time, a year ago, the average ARM 5/1 was 3.06%.
ARMs usually have lower rates than those offered on fixed rate loans – at least in the beginning. After the initial phase of the fixed rate, the interest rate is adjusted according to basic rate or some other test.
ARM 5/1 has a five-year flat rate period with subsequent adjustments every (one) year thereafter. As the rate can go up or down, adjustable rate mortgage loans can sometimes be tough on the budget.
Refi will benefit nearly 14 million homeowners
Given the historically low mortgage rates in the past year, it can be assumed that homeowners flooded their lenders with refinancing applications. But that did not happen.
A survey by real estate platform Zillow found only 22% eligible homeowners refinanced their mortgages between April 2020 and April 2021. Almost half of them saved $ 300 or more a month through refinancing.
New data from a data and technology mortgage company Black Knight show that at current 30-year rates, 13.9 million homeowners can save an average of $ 293 per month by refinancing their homes.
If you’re a homeowner who is delaying refinancing, don’t be intimidated by the process. Start by collecting and comparison of mortgage offers from at least five lenders… From now on, you won’t have to do anything more complicated than what you were supposed to do when you took out your original mortgage.
When you apply for a loan to refinance or buy a home, lenders keep a close eye on your creditworthiness. It’s easy today check your credit score for free to see if you need to increase it before you start contacting creditors. The higher your credit rating, the lower your mortgage rate is likely to be.
And if you end up eliminating refi, you can lower the cost of home ownership by getting a better homeowner insurance deal. Small shopping comparison that’s all you need to know if you’re overpaying. The same strategy could save hundreds a year on auto insurance, also.