U.S. mortgage rates have remained below 3% for most of the past two months, but Americans hoping rates will stay in that ultra-low territory might not like what they see later this year.
Unemployment has fallen, inflation is on the rise, and more Americans are being vaccinated – all factors suggesting a healthier economy and higher mortgage rates are on the way.
Rates are rising, according to a closely watched survey. If you are looking to enter the housing market for the first time or refinance the home you have owned for years, time may be running out for a mortgage rate that is very low.
Here is an overview of the current average rates.
The average rate on America’s most popular home loan – the 30-year fixed-rate mortgage – rose to 2.99% last week, from 2.95% the week before, mortgage giant Freddie reported Thursday. Mac.
Despite the slight increase, rates remain well below the 3.18% average from a year ago in the long-standing survey.
But in his latest quarterly forecast, Freddie Mac said the 30-year rate will average 3.4% by the fourth quarter of this year. A few tenths of a percentage point may not seem like a lot, but when you budget for a mortgage payment, along with all of your other household expenses, the difference will be noticeable.
While interest rates are still affordable, double-digit gains in home prices over the past 10 months have pushed the national median listing price to a new high of $ 380,000, said George Ratiu, economist. principal at Realtor.com. This translates into a monthly mortgage payment of almost $ 160 more than in 2020.
Many homeowners have decided that it makes more financial sense to refinance their mortgage than to buy another home. At current mortgage rates, 14.1 million homeowners still have the potential to save an average of $ 287 per month through refinancing, mortgage technology and data provider Black Knight said recently.
Rates on a 15-year fixed-rate mortgage are unchanged at an average of 2.27%, according to Freddie Mac’s long-running survey. A year ago, the 15-year rate averaged 2.62%.
Shorter term loans are popular among refinancing homeowners who can afford higher monthly payments or who wish to lower their lifetime interest costs.
Sam Khater, chief economist and longtime Freddie Mac observer, says continued low rates make refinancing an “option to consider.”
For buyers, however, the competition is fierce.
“Home prices continue to accelerate as inventories remain low and new home construction cannot happen fast enough,” Khater said. “Many potential buyers would like to take advantage of low mortgage rates, but the competition is fierce. “
5/1 adjustable rate mortgages
The average rate for 5/1 variable rate mortgages, or ARMs, was 2.64% last week, up from the week before when the average was 2.59%, according to Freddie Mac. A year ago, these MRAs averaged 3.10%.
Variable rate loans usually start with lower interest rates than their fixed rate counterparts, but after a while the rates may “adjust” up or down based on the prime rate or from another reference.
These mortgages are called ARM 5/1 because the interest rates are set for the first five years and then adjust every (one) year thereafter.
Find the lowest rate
With the typical 30-year fixed-rate mortgage still below 3% – albeit by a hair’s breadth – this could be your last and best chance at getting a killer rate that you can brag about to your friends.
Keep in mind that the best rates go to borrowers with the highest credit scores. If you haven’t checked in a while, it’s easy these days to check your credit score for free.
Comparison shopping does wonders for finding the lowest mortgage rate available in your area and for someone with your credit score. Studies by Freddie Mac and others have shown that borrowers who seek loan deals from at least five different lenders typically save thousands of dollars over time.
While you’re at it, don’t miss out on other ways to lower your housing costs. When buying or renewing your home insurance policy, gather quotes from multiple insurers to make sure you get the best price on the coverage you need.