Mortgage rates are falling, with refinances below 3% and even 2%
Mortgage rates fell a week after they rose, a closely watched survey shows. The pullback gives homeowners more time to hold on to low refinancing rates.
Looking around, borrowers can find 30-year refi loans at rates below 3% and 15-year mortgages at even lower rates.
However, interest rates are forecast to rise in the coming weeks and months, which means that the days of super cheap refinancing rates are numbered.
30 year mortgage interest
Interest rates on America’s most popular home loan, the 30-year fixed-rate mortgage, dropped to an average of 2.86% last week, down from 2.87% a week earlier, mortgage giant Freddie Mac reported Thursday. The typical rate remains relatively close to January’s all-time low of 2.65%.
A year ago, the 30-year rates were on average 2.99% more expensive.
Mortgage rates were up sharply the previous week, but they leveled off when a disappointing report on US retail sales caused US Treasury bond rates to stagnate, said George Ratiu, senior economist at Realtor.com. The interest rates are usually based on the yield on the 10-year bond of the US Treasury Department.
In addition, “mortgage rates responded to subsequent investor concerns about falling consumer sentiment and rising COVID cases of the Delta variant,” says Ratiu.
Mortgage rates for 15 years
The interest rate on 15-year fixed-rate loans rose an average of 2.15% to 2.16% last week. They are not far from their most recent all-time low of 2.10%.
Fifteen year mortgages are a popular choice for refinance loans. And because of the way averages work, 15 year loans can be found at interest rates below the current average of 2.16% – exactly 2% or even below.
The shorter term home loans have much higher monthly payments than 30 year mortgages. But borrowers pay off their loans faster and can save a lot on interest.
A year ago, the 15-year fixed price averaged a much steeper 2.54%.
5/1 adjustable mortgage rates
The cost of 5/1 variable rate mortgages or ARMs has decreased.
A 5/1 ARM had an average introductory rate of 2.43% last week, up from 2.44% the week before, says Freddie Mac. At that time last year, 5/1 ARMs were significantly more expensive at an average rate of 2.91%.
Variable rate mortgages have two phases. In the first phase, you pay a fixed rate, which is usually lower than a 30 year fixed rate loan. Once this period is up, your ARM rate will periodically adjust either up or down.
With a 5/1 ARM, you pay the same mortgage rate for the first five years. After that, your tariff will be adjusted every (one) year.
Experts say mortgage rates will rise shortly
Mortgage rates are taking time out, but borrowers shouldn’t get complacent.
As it sees more signs of the economy improving, the Federal Reserve will likely begin pulling its emergency policy that kept interest rates at all-time lows during the pandemic, Realtor’s Ratiu says.
“This means that we can expect rates to rise again above 3.0% by mid-March towards the end of the year and by 2022,” he says.
Freddie Mac recently forecast that 30-year fixed-rate mortgages will average 3.4% by the end of 2021 – then continue to rise over the course of 2022 and average 3.8% by the end of next year.
So, homeowners may be running out of time to cut their mortgage payments by refinancing. A recent Zillow poll found that more than three-quarters of homeowners never received refinance at extremely low rates in the past year; Almost half of those who have done this are saving $ 300 or more per month.
So, get a low mortgage rate while you can
If you’ve been holding back refinancing but decide it is finally time to stop procrastinating, take these steps to get the lowest possible mortgage rate.
The best interest rates usually go to borrowers with the strongest credit ratings, so do a credit check to see where you stand. It’s very easy to get your credit check for free these days – so take a look and see if there is any need to improve your credit before you start looking for loan offers.
Mortgage lenders may not want to work with you if you already have several high-yield debts, including on credit cards. Consider converting these balances into a low-interest debt consolidation loan to lower your interest costs and clear your debt faster.
Once it’s time to buy a mortgage, collect offers from multiple lenders to find the best interest rate for your area and for someone with your credit profile. Studies by Freddie Mac and others have found that comparing at least five offers is key to securing the cheapest mortgage rate.
Then a small additional comparison purchase could help you find a better deal on your home insurance that can save you hundreds of dollars a year.
This article is for information only and is not intended as advice. It is provided without any guarantee.