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Borrowers have been given more time to grab a record-low mortgage rate

Ethan Rotberg
·4 min read
Borrowers have been given more time to grab a record-low mortgage rate
Borrowers have been given more time to grab a record-low mortgage rate

Mortgage rates haven't budged off their record lows, which means borrowers have more time to take advantage of deep, deep discounts on loans.

The typical mortgage is more than a full percentage point cheaper than a year ago, thanks to rates that have been spiraling downward since the pandemic led to economic shutdowns back in March, a closely watched weekly survey shows.

Experts say mortgage rates are lingering around all-time lows despite rising interest on Treasury bonds, which would normally push rates higher.

Bottom-of-the-barrel rates on home loans are motivating homebuyers to enter the market, and are encouraging homeowners to refinance and cut their monthly mortgage payments.

Rates stay in the cellar

A magnifying glass is looking at a poster with the word Low rates and wooden house.
Andrii Yalanskyi / Shutterstock

Mortgage rates remained at their lowest levels in history last week, with 30-year fixed-rate loans averaging 2.71%, mortgage giant Freddie Mac said on Thursday. Rates are in their deepest valley since the company began its weekly survey in 1971.

Thirty-year mortgage rates are now a stunning 102 basis points lower than at this time last year, when the average was 3.73%. A basis point is equal to one-hundredth of 1%.

The lingering record lows are undeterred by climbing interest rates (yields) on Treasury bonds, says Matthew Speakman, an economist with Zillow.

“Progress around the rollout of a COVID-19 vaccine and reported advances in discussions surrounding a potential next wave of fiscal relief have buoyed investor optimism of late, leading bond yields to trend higher,” he says.

But upward movement in mortgage rates that would normally follow hasn’t happened. Speakman says many factors are contributing to this unorthodox movement, but "the relatively muted changes in mortgage rates is mostly thanks to enduring demand for loans."

In other words, demand for mortgages has been so fierce that some lenders have been keeping rates higher than where the market would like to push them. That means there’s less pressure on rates to rise now, as bond yields go up.

Millions can trim their monthly bills

Photo of a positive young couple embracing and calculating the bills at home.
bbernard / Shutterstock

If you have a strong credit score and at least 20% equity in your home, there have probably never been better conditions to refinance your mortgage.

Americans are already refinancing at a torrid pace, according to the Mortgage Bankers Association, with refi loan applications pouring in at nearly double the rate of a year ago.

But tons more can still take advantage. More than 19 million mortgage holders are holding out and could still pocket savings averaging $308 per month by refinancing now, the mortgage technology and data provider Black Knight reported earlier this month.

Trying to "time the market" could backfire — rates have been particularly hard to predict this year. If you do miss out on the historic lows, you’ll want to look for savings elsewhere.

If you do some comparison shopping when you buy or renew your homeowners insurance, you could save more than $1,000 a year, studies have found.

Rates take some of the heat out of home prices

Couple moving in house
gpointstudio / Shutterstock

Rates on other mortgages also continue to hover near all-time lows, the Freddie Mac survey shows.

The average for a 15-year fixed-rate mortgage was unchanged last week at 2.26%. Those mortgages, often used for refinance loans, are way below where they were last year at this time, when they stood at 3.19%.

Rates on 5/1 adjustable-rate mortgages, or ARMs, were at an average 2.79%, down from the previous week’s 2.86%, and far below last year’s 3.36%.

Ultra-low rates have brought more buyers into the fold, even as housing prices keep trending up amid dwindling inventory. Median listing prices have grown by double digits for 17 consecutive weeks, according to research from Realtor.com.

“Rising home prices can sometimes sap the energy from buyer demand as affordability becomes a challenge,” says Danielle Hale, Realtor.com’s chief economist. “But with rates still nearly a whole percentage point below year-ago levels, buyers have not yet had to grapple with this challenge.”

To find the best deals, you have to shop around. Experts say buyers should gather and compare at least five rate quotes — because rates can vary sharply from one lender to the next.