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Mortgage Rates Stay Low, Capping a Year for the Record Books

Doug Whiteman
Mortgage Rates Stay Low, Capping a Year for the Record Books

For a third straight week, mortgage rates are holding steady at historically low levels for this time of year — which is a fitting conclusion to one of the lowest years on record for rates, according to mortgage giant Freddie Mac.

But it gets even better for borrowers: Rates are expected to dip lower in 2020.

The holidays and the start of a new year can be an excellent time for homebuying, and if you already own a home, you might use your holiday downtime to look into refinancing. If you spot a good mortgage rate, weigh whether locking it would be a smart move.

This week's numbers

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Rates are steady again this week.

Mortgage rates haven't budged much this month. This week's average for a 30-year fixed-rate mortgage is 3.74%, up just barely from last week's 3.73%, mortgage giant Freddie Mac said Thursday. The loans in the Freddie Mac survey come with an average 0.7 point.

One year ago, the benchmark mortgage rate was about three-quarters of a percentage point higher, at 4.55%, on average.

Rates remain at their lowest December levels since 2012, according to a MoneyWise.com review of Freddie Mac's historical data, and they bring down the curtain on a remarkable year.

"The 30-year fixed-rate mortgage rate saw little change again this week and averaged just 3.9% during 2019, the fourth-lowest annual average level since 1971 when Freddie Mac started its weekly survey," says Sam Khater, the company's chief economist.

The benchmark mortgage rate dropped this year from its 2018 average of 4.6%.

Use this calculator to see the kind of monthly payment you can expect from today's low rates.

Take advantage of the holiday lull

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The holidays can be an excellent season for homebuying.

If you took out a mortgage as recently as 2018, you might chop your monthly payment by refinancing into a new loan at a lower rate.

Homeowners who refinanced their mortgages during the spring of this year have saved themselves an average of about $140 a month, or $1,700 a year, Freddie Mac has said.

Mortgage activity has gone into its usual holiday season slump. Mortgage applications were down 5.3% last week, with demand for both refinance and purchase loans falling 5% from a week earlier, the Mortgage Bankers Association announced Thursday. "Purchase loans" are mortgages used to buy homes.

"We are in the slowest time of the year for the purchase market," notes Mike Fratantoni, chief economist for the Mortgage Bankers Association. "Purchase application activity declined after the seasonal adjustment, but still remains about 5% ahead of last year's pace."

If you've been considering buying a home, get out there and take advantage of the current lull, says Corey Burr, senior vice president with Sotheby's International Realty in Chevy Chase, Maryland.

"The professionals involved in the real estate buying and settlement process typically are available because there is less activity," Burr says. "So, getting an inspector may not be too difficult, and getting great service from the real estate agent to the settlement company is more easily accomplished."

The outlook for mortgage rates

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Freddie Mac sees even lower mortgage rates in the future.

The low mortgage rates that defined 2019 are likely to go even lower: to an average 3.8% for 30-year fixed-rate mortgages in both 2020 and 2021, according to Freddie Mac's current forecast.

"Heading into 2020, low mortgage rates and the improving economy will be the major drivers of the housing market with steady increases in home sales, construction and home prices," says Freddie Mac's Khater.

In fact, rising prices could become a problem.

"While the outlook for the housing market is bright, worsening housing affordability is no longer a coastal phenomenon and is spreading to many interior markets, and it is a threat to the continued recovery in housing and the economy," Khater cautions.

Take a look at today's best mortgage rates where you are.

This week's other mortgage rates

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Other mortgage rates are mixed this week.

The average for 15-year mortgages is flat for the third week in a row, at an average 3.19%. Those shorter-term home loans are often used for refinances.

Last year at this time, 15-year fixed-rate mortgages averaged 4.01%, Freddie Mac says.

Rates have jumped this week on 5/1 adjustable-rate mortgages, or ARMs, which are level for five years and then can adjust up — or down — every subsequent year.

ARMs are currently being offered at an average initial rate of 3.45%, up from last week's 3.37%. A year ago, the ARM starter rates were averaging an even 4%.

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