Here’s the unpleasant truth about the COVID-19 delta variant: it’s a disaster for the nation and the world, but it was something more positive for homeowners looking to refinance their mortgages.
As COVID cases skyrocketed in the US last week, the resulting economic uncertainty has pushed 30-year mortgage rates. even deeper, below 3% and closer to their historic lows, according to a lengthy weekly poll.
A separate study says the drop in rates means millions of homeowners are now prime candidates for refinancing, who can save about $ 300 a month by swapping their mortgages for cheaper new ones.
30 year mortgage rate
According to mortgage giant Freddie Mac, the interest rate on a 30-year fixed-rate mortgage averaged 2.77% last week. reported on Thursday… This is the lowest since early February – and close to an all-time low of 2.65% hit in the first week of January.
“With the global market uncertainty surrounding delta COVID-19, we saw the yield on 10-year Treasuries fall and as a result, mortgage rates followed suit,” said Sam Hather, chief economist at Freddie Mac. “This is a good reason for those who still looking for refinancing, renovate or even buy a new home. “
At that time, a year ago, the average rate on 30-year fixed-rate loans was 2.88%.
Rates have dropped so much that mortgage technology company Black Knight, reported Last week, 15.1 million current mortgage holders are good candidates for refinancing, who can save an average of $ 298 per month by refinancing their homes.
Mortgage rates for 15 years
This is where things become especially attractive to homeowners.
The average 15-year fixed-rate mortgage, a popular refinancing choice, was the second consecutive week at its lowest level ever, just 2.10% last week. A year ago, the average size of short-term loans was significantly higher than 2.44%.
Because the term is shorter, your payments on a 15-year mortgage will be significantly higher than on a 30-year mortgage.
But the 15-year fixed rate has two distinct advantages over 30-year products when it comes to refinancing: a shorter loan term and generally lower rates. With a 15-year maturity, you’ll pay much less interest and get your home faster.
Adjustable mortgage rate 5/1
The 5/1 adjustable rate mortgage, or ARM, fell last week, dropping to 2.40% from 2.45% the week before.
Last year at this time, the average ARM 5/1 was 2.90%.
Adjustable rate loans can be a bit of a gamble. For the first few years, they have flat rates, which are generally lower than what you would pay for a more traditional flat rate product such as 30 or 15 years. But after that, the rate can increase or decrease (“adjust”) every year.
ARM 5/1 will force you to pay a fixed interest rate for the first five years of your loan. Thereafter, your rate will be adjusted every (one) year.
Projected rates will be higher
A few months ago, few could have imagined that mortgage rates would return to record lows. It’s hard to say how they’ll move from here, ”says Daniel Hale, chief economist at Realtor.com.
“Eventually, we expect rates to start to rise, but the timing of that hike depends on how the latest health threat evolves and how it affects the Fed’s monetary stance,” Hale says.
The Federal Reserve expects that it will need to continue its anti-pandemic policy, which included keeping the key interest rate near zero and buying tens of billions of dollars in Treasury bonds and mortgage-backed securities every month. This tactic has helped keep mortgage rates low.
But some of the strongest players in the lending industry expect rates to rise in the next few months.
Freddie Mac recently predicted that 30-year fixed-rate mortgages will average 3.1% by the end of 2021 and then rise in price every quarter of 2022, approaching an average of 3.8% by the end of next year.
According to the latest forecast by the Mortgage Bankers Association, the 30-year fixed rate will average 3.4% this year. This suggests that much higher rates are expected given how low rates were during the first eight months of 2021. In 2022, the MBA expects a 30-year period to grow to an average of 4.3%.
How to get a lower rate
Lesson: if low mortgage rates are the determining factor when deciding whether to buy a home or refinance your mortgage, today’s rates can be as good as they are going to get.
Mortgage rates are undoubtedly attractive right now, but the lender will not necessarily offer you the lowest rate. It takes a bit of work to get the best rate.
Work on your credit score. The best mortgage rates are usually offered to borrowers with the most impressive credit history. Today you can easily take take a look at your credit score for freeto see if you need to improve it before you start contacting lenders.
Deal with debt and free up your finances. Having a few high-interest debt, such as credit card balances, will not give lenders confidence that you can pay them off every month. Consider combining your balances into a single one, low interest debt consolidation loanso you pay less interest, get rid of other debts faster, and improve your cash flow.
Take a closer look at the shops. When you’re ready to go to lenders, don’t rush to the first one that claims to offer “the lowest rates.” Everyone says like that. Compare mortgage offers from at least five creditors to find the best rate available in your area and for a borrower with your unique credit profile.
This article provides information only and should not be construed as advice. Provided without warranty of any kind.