The U.S. election drama has helped mortgage rates fall to new depths this week, according to a popular survey.
Rates are at record lows as Americans wait on edge for the final vote tallies from battleground states. Experts say the uncertainty is spiking demand for bonds, and forcing downward pressure on mortgage rates.
Homeowners are continuing to take advantage of the low-rate environment, as refinancing continues at a blistering pace. And, more prospective buyers can benefit from rock-bottom rates as home listings finally increase in some areas of the country.
Rates go lower amid unsettled election
Mortgage rates have hit historic lows for the 12th time this year, mortgage company Freddie Mac said on Thursday.
Rates for a 30-year fixed-rate home loan are averaging 2.78%, down from last week’s 2.81%, and miles from last year at this time, when the typical rate was 3.69%. The new average is the lowest since Freddie Mac’s weekly survey began nearly 50 years ago.
Amid a mix of economic and political uncertainty, experts say investors are moving money out of stocks and into government bonds as a safe haven. The increased demand for bonds makes their prices go up, then bond interest rates (yields) go down — and so do mortgage rates.
“Given the still-uncertain election results, more sharp movements in mortgage rates in either direction may be on tap in the coming days and weeks,” says Matthew Speakman, an economist with Zillow.
Freddie Mac shows rates on other popular mortgages are at or near record lows. The average for a 15-year fixed-rate loan is unchanged this week, at a lowest-ever 2.32%. Rates on those mortgages, often used for refinance loans, are down from 3.13% a year ago.
Rates on 5/1 adjustable-rate mortgages, or ARMs, are averaging 2.89%, up slightly from last week’s 2.88%, but still far from last year’s 3.39%.
Refinancing keeps sizzling
Homeowners are requesting refinance loans at a torrid pace, according to the Mortgage Bankers Association, with refi applications up 88% compared to a year ago.
But many owners haven’t jumped aboard yet — in fact, some 18.5 million mortgage holders are in a good position to refi and save around $300 monthly, the mortgage data firm Black Knight said earlier this week. The researchers add that 2.5 million could even save $500 or more every month by refinancing.
Good refi candidates — those with solid credit scores and at least 20% equity in their homes — need to hurry to lock in the best rates while they can.
That’s because a new fee on refinance loans beginning Dec. 1 could cause rates to rise. Freddie Mac and Fannie Mae — government-sponsored mortgage giants that buy most U.S. home loans from lenders — say COVID-19 has made it necessary for them to introduce the fee, to offset losses related to the pandemic.
If you wait too long and miss out on the lowest of the low rates, you can compensate by finding discounts elsewhere — like by cutting your homeowners insurance premium. A little comparison shopping will help you find the best rate possible.
Low rates help homebuyers as prices rise
A scorching-hot housing market is still driving home prices into the stratosphere — but there are signs of relief for buyers.
While the nationwide number of newly listed homes continues to fall, the decline has slowed substantially over the last month as more sellers return to the market, according to data from Realtor.com.
In fact, some parts of the country are seeing increases in housing supplies, with markets in the West and Northeast showing influxes of new listings.
Even with affordability concerns front and center, low rates are contributing to overall savings.
“For buyers looking to purchase the median-priced home this month, the monthly mortgage payment will be just $8 less than it would have been last year, for a total savings of about $99 per year,” says George Ratiu, senior economist at Realtor.com.
A homebuyer hunting in a competitive market should compare at least five rate quotes from lenders, because rates can vary widely from one lender to the next.