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Mortgage rates fall to new low, but will politics push them higher?

Ethan Rotberg
·3 min read
Mortgage rates fall to new low, but will politics push them higher?
Mortgage rates fall to new low, but will politics push them higher?

It’s deja vu for borrowers: The new year has kicked off with a new record low for mortgage rates, a popular weekly survey shows.

Discounted rates are energizing eager homebuyers and helping homeowners refinance their loans and slash their monthly mortgage payments.

But even though rates are nearly a full percentage point lower than a year ago, borrowers may not have much time to grab a spectacularly cheap mortgage.

Political developments are pushing up the interest on Treasury bonds, which is putting pressure on mortgage rates.

Rates find new lows, for now

Young man and woman sitting indoors in office, business meeting concept.
Halfpoint / Shutterstock

Mortgage rates hit a new low last week, mortgage giant Freddie Mac said on Thursday, with 30-year fixed-rate loans dropping to an average 2.65% — from 2.67% a week earlier.

At this time last year, 30-year mortgages stood at 3.64%. But since the coronavirus pandemic first started battering the U.S. economy in March, rates have new all-time lows 17 times.

As unemployment remains high and the country tries to contain the still-surging pandemic, interest rates are still finding new depths. Other popular mortgages lingered near lows or dropped further, the Freddie Mac survey shows.

The average for a 15-year fixed-rate loan fell to a record-low 2.16% last week, from 2.17%. Those mortgages, a favorite type for refinancing, also are well below last year, when the average was 3.07%.

Rates on 5/1 adjustable-rate mortgages, or ARMs, are averaging 2.75%, up from 2.71% the previous week. One year ago, the average was 3.30%.

Rates may be heating up

Fire house, insurance and mortgage concept. Small wooden house toy and paper fire shape on orange background top view with copy space
CisUl / Shutterstock

Though rates are starting the new year low, they're feeling heat to move north.

After last Tuesday’s U.S. Senate runoff elections in Georgia gave President-elect Joe Biden a Congress controlled by his Democratic party, investors are expecting more government spending — maybe even a third round of stimulus checks. Interest rates, or yields, on Treasury bonds are rising in reaction.

“On Wednesday, the 10-year Treasury moved above 1% for the first time since March, as the outcome of the Georgia Senate race seemed to indicate the possibility of less gridlock,” says Realtor.com Chief Economist Danielle Hale.

Mortgage rates tend to follow the yield on the benchmark 10-year Treasury note.

A survey of lenders posted Wednesday by Mortgage News Daily showed a jump last week in 30-year fixed mortgage rates, to an average 2.88% on Friday from 2.76% on Monday. Zillow economist Matthew Speakman also observed the increase, though he says rates are still “very low by historical standards.”

Rates remain a bargain for borrowers

Family Sitting In Garden Together
Monkey Business Images / Shutterstock

Even so, if you’re in the market for a mortgage, this isn’t the time to sit on your hands — though that’s exactly what many homeowners are doing.

More than 19 million mortgage holders are holding out, even though they could pocket savings averaging $308 a month by refinancing now, the mortgage technology and data provider Black Knight reported last month.

Good refi candidates — those with a solid credit score and at least 20% home equity — may need to hurry to lock in one of the best rates while they're still available.

Experts say borrowers should compare at least five mortgage offers, because rates can vary from one lender to the next.

To find even more savings, be sure to do some shopping around when you buy or renew your homeowners insurance. Studies have found you can save more than $1,000 a year by finding the lowest rate for the coverage you need.