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After surging for weeks, mortgage rates pause and give borrowers a break

Nancy Sarnoff
·4 min read
After surging for weeks, mortgage rates pause and give borrowers a break
After surging for weeks, mortgage rates pause and give borrowers a break

Homebuyers have gotten a reprieve from sharply rising mortgage rates, according to a long-running survey, and are offering a springtime gift to home shoppers who have been getting weary of higher borrowing costs and rising home prices.

Rates are holding steady and remain at historically cheap levels, though they’ve made a leap from their early January record low.

That underscores the urgency for would-be buyers and those still looking to refinance to nail down a loan before mortgage rates take off again.

30-year mortgages

Up arrow and many houses. Growth in real estate prices market. Buying and selling house.
ADragan / Shutterstock
Mortgage rates are slightly higher this week.

The average rate on the popular 30-year fixed-rate mortgage is 3.18%, mortgage giant Freddie Mac reported on Thursday. That’s barely a change from the previous week's rate of 3.17% in the 50-year-old survey.

Last week marked the benchmark 30-year rate’s seventh straight weekly jump and a new high for 2021.

Higher rates have been driven by positive employment numbers and consumer confidence, pushing investors back into the stock market, says Realtor.com economist Geroge Ratiu.

Still, rates have almost never been this low. They’re down from a year ago, when the average rate was 3.33%, and significantly lower than two years ago, when the typical 30-year rate was above 4%.

Mortgage rates generally follow the path of Treasury bond yields, the interest rates the U.S. government pays to borrow money. They rose modestly this week after President Joe Biden released details of his proposed infrastructure spending plan.

15-year mortgages

The average rate on a mortgage with a 15-year term is unchanged at 2.45%, Freddie Mac says.

If you’ve been considering refinancing into one of the shorter-term loans, now could be a good time, with mortgage rates in a lull. They’re poised to go higher, says Zillow economist Matthew Speakman.

“As the economy continues to thaw from its pandemic-induced freeze and government spending increases, upward pressure on mortgage rates should remain,” Speakman says.

A year ago, rates on 15-year mortgage loans were averaging a steeper 2.82%.

5/1 adjustable rate mortgages

The 5/1 adjustable rate mortgage is averaging 2.84%, also unchanged from a week earlier but down from 3.4% a year ago at this time, according to the Freddie Mac survey, which focuses on borrowers who put 20% down and have excellent credit.

These mortgages — also called ARMs — adjust after a period of time that’s determined at the start of the loan.

If you have an adjustable-rate mortgage, it could be a time to consider refinancing into an attractive, no-surprises fixed rate.

Rising rates pose challenges for homebuyers, homeowners

Street of suburban homes
Konstantin L / Shutterstock

Keep in mind that your monthly mortgage payment could rise along with rates if you don’t have the cash to put up a bigger down payment.

Given this year’s rise in mortgage rates, a homebuyer today will spend an additional $93 per month over the course of a 30-year loan. That adds up to more than $1,100 per year and $33,000 over the life of the loan, Realtor’s Ratiu says.

Higher rates and surging home prices have been discouraging would-be buyers from making offers on houses. But there’s reason to be hopeful, as the spring selling season heats up.

"We expect to see more sellers emerge in the weeks ahead, which should give buyers more options," says Realtor.com chief economist Danielle Hale. "Homes will likely continue to sell fast, but increasing interest rates and monthly costs could slow the pace of price gains, unless we see a boost in demand from equity-rich repeat buyers."

The rise in mortgage rates also has been homeowners more skittish about refinancing, but mortgage technology and data provider Black Knight recently estimated that 11.1 million Americans with mortgages could still benefit from refinancing their homes.

Important keys to finding low rates today

Couple resting on couch after moving in, man and woman relaxing on sofa just moved into apartment
fizkes / Shutterstock

If you have a 30-year mortgage with at least 20% equity, your credit score is 720 or higher and you could cut three-quarters of a percentage point (0.75) off your current rate by refinancing, you’re in the prime refi zone, Black Knight says.

Aren’t sure where your credit score stands? Today it’s very easy to check it for free.

Whether you’re a would-be homebuyer or refinancer, having a solid credit score is one important key to landing an attractive mortgage rate. Another is shopping around.

Gather and compare mortgage offers from at least five lenders to find the lowest rate you can qualify for. More than one study has found that a borrower who reviews five rate offers will save thousands more over time than a person who stops after getting an offer from just one lender.

And though mortgage rates may not be as unbelievably low as they were a few months ago, you do still have other ways to cut your housing costs. Use your comparison shopping skills when you buy or renew your homeowners insurance, to find the best price for your policy.