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Chaos in Washington keeps mortgage rates near all-time lows

Ethan Rotberg
·4 mins read
Chaos in Washington keeps mortgage rates near all-time lows
Chaos in Washington keeps mortgage rates near all-time lows

The pandemonium in the nation's capital has been very good for homebuyers and homeowners.

A popular survey shows mortgage rates are sticking around their recent record lows as the election, the president's case of COVID, and the battle over new relief measures keep investors on edge.

Cheap borrowing costs are continuing to spark a frenzy in the housing market, though there are signs that low rates won’t keep balancing out the soaring prices that homebuyers are encountering.

But as rates continue to hang around all-time lows, homeowners who could benefit from refinancing still have time to take advantage.

Rates are calm during a volatile time

Canoe floating on the calm water under amazing sunset
fran_kie / Shutterstock

Mortgage rates have ticked down a notch to an average 2.87% for a 30-year fixed-rate loan, from 2.88% a week earlier, mortgage company Freddie Mac said on Thursday.

Rates on the most popular mortgage have been fairly steady since reaching a record low 2.86% one month ago. Last year at this time, 30-year fixed-rate mortgages were averaging 4.60%

“The year-long slide in mortgage rates seems to be ending as rates have flattened over the last month and the economic rebound has slowed,” says Sam Khater, Freddie Mac’s chief economist.

The consistency in rates comes during a volatile stretch in Washington, which has included President Donald Trump's COVID-19 diagnosis, the approaching election and uncertainty over the next round of coronavirus relief.

Even the highest yields on Treasury bonds in more than three months haven't been able to bump up mortgage rates, which usually track the interest on Treasuries. Matthew Speakman, an economist with Zillow, believes rates may be able to stay in record territory at least a little while longer.

“While the upward move in Treasurys does increase the likelihood of mortgage rates eventually moving higher, it appears that rates do have a bit of a buffer before they head in that direction,” he says.

A frustrating season for homebuyers

Home For Sale Real Estate Sign in Front of Beautiful New House.
Andy Dean Photography / Shutterstock

Months of paltry mortgage rates have escalated home sales, even with a limited flow of new listings.

“The continued imbalance of housing demand versus supply lifted prices about 13% higher than last year, a scorching pace which is outstripping buyers’ wages and ability to keep up,” says George Ratiu, senior economist at Realtor.com.

The record low rates are no longer offsetting sky-high prices, adds Ratiu, causing affordability to take center stage.

New “purchase loan” mortgage applications dropped this week, according to a report from the Mortgage Bankers Association as entry-level buyers struggled with the higher prices.

The Freddie Mac survey shows rates on other popular mortgages also barely moved last week. The average for a 15-year fixed-rate mortgage inched up to 2.37%, from 2.36% the previous week. Rates on those mortgages, often used for refinance loans, are still at rock bottom compared to last year, when the average was 3.05%.

Rates on 5/1 adjustable-rate mortgages, or ARMS, are averaging 2.89%, down slightly from 2.90% a week earlier and way down from last year’s 3.35%.

Refinance while you can

Happy smiling family with child over  house background
kurhan / Shutterstock

Homeowners may not have much more time to score ultra-low mortgage rates.

An incoming fee on refinance loans could push refi rates higher this fall as more lenders pass the cost along to borrowers. So, owners need lock in great refinance rates while they still can.

An estimated 19.3 million mortgage holders could lower their interest rates enough to reduce their monthly payments by an average $299, mortgage data firm Black Knight recently reported.

Experts say a borrower who's determined to find the lowest rate available for their area and for someone with their credit score should gather and compare at least rate quotes from lenders.

A Freddie Mac study found if you shop around to five lenders, you'll pay an average of $3,000 less over time than someone who seeks out only one mortgage offer.

Even if rates do rise, you can use those expert comparison shopping skills when you buy or renew your homeowners insurance, so you’ll get the right coverage at the lowest possible price.