Just when it seemed that mortgage rates might start rising again after the past year’s freefall, rates have taken another tumble this week, a popular survey shows.
The investor optimism that kicked off 2021 is starting to lose steam, as it becomes clear the economic malaise from COVID-19 isn’t ready to lift quite yet. Interest rates are sinking a bit closer to all-time lows.
What that means is homebuyers can still secure incredibly cheap loans, and homeowners can slash their monthly payments with a timely refinance.
Rates shrink back down
Thirty-year fixed-rate mortgages are averaging 2.73% this week, down from last week’s 2.77%, mortgage company Freddie Mac said on Thursday.
Low rates have been a major boon for borrowers ever since the pandemic started clobbering the U.S. economy in March. Average rates have hit new all-time lows 17 times, according to Freddie Mac, which began keeping records nearly 50 years ago.
“After spiking in early January, mortgage rates have spent the last couple weeks trending consistently lower,” says Matthew Speakman, an economist with Zillow. “The continued spread of the virus, the introduction of new, more virulent variants, and a thus-far sluggish rollout of the vaccine all injected fresh uncertainty into markets.”
The uneasy mood from investors has kept them funneling funds into mortgage bonds, adds George Ratiu, senior economist at Realtor.com, and that has helped drive down rates.
Are low rates back to stay?
Rates on other popular home loans also have dipped or stayed level this week, the Freddie Mac survey shows.
The average for a 15-year fixed-rate mortgage — a popular loan choice for refinancing — decreased to 2.20%, down from 2.21% last week. Those loans averaged 3.51% during the same period last year. For 5/1 adjustable-rate mortgages, or ARMs, the current average is unchanged from last week, at 2.80%.
While expected, Wednesday’s announcement from the Fed that it will leave its key interest rate near zero will preserve the downward pressure on mortgage rates.
Rates for 30-year loans even hit another record low in Mortgage News Daily’s survey of lenders, landing at 2.75% on Wednesday.
But it doesn’t make sense to wait for rates to move lower still, says Matthew Graham, the publication’s chief operating officer. “At some point, the record run will be over, and the turning point is getting closer all the time,” Graham says.
According to Freddie Mac’s current forecast, 30-year fixed mortgage rates are likely to shoot up to an average 2.9% this year.
How to chop your home bills
With mortgage rates heading back in the direction toward record lows, homeowners are grabbing refis and scoring much lower monthly payments.
The refinance frenzy slowed a bit last week, but requests are rolling in 83% faster than during the same time last year, according to the Mortgage Bankers Association.
Anyone with a sound credit score and at least 20% equity in their home is a good refi candidate. More than 19 million mortgage holders can save an average $308 per month by refinancing now, says mortgage technology and data provider Black Knight.
While now might be the right time to refi, resist the urge to grab the first low rate you see. Studies show that if you compare offers from at least five different lenders, you can save thousands of dollars in interest over the life of your mortgage.
Want to save even more money? Shop around for rates on homeowners insurance, and there’s a good chance you can find better coverage than you have now, and for a lower price.