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Unusually Low January Mortgage Rates Bring Out the Buyers

Shane Murphy
Unusually Low January Mortgage Rates Bring Out the Buyers

People attending open houses this weekend have a lot to smile about, and not because of marble countertops or bay windows. Mortgage rates remain at their lowest levels for mid-January since 2013, according to the weekly survey from mortgage giant Freddie Mac.

Recent world events like the tensions with Iran and the ongoing trade dispute with China have held down mortgage rates throughout early January, making it an ideal time for U.S. homebuyers and homeowners to reduce their interest costs.

Thanks to the attractive mortgage rates, buyers are finding open houses can be crowded — because lenders and real estate agents are reporting an unsually busy winter for the housing market.

Mortgage rates hang on at historic lows

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Mortgage rates are mostly holding steady at their lowest levels in months, Freddie Mac reports.

The average for a 30-year fixed-rate mortgage is currently 3.65%, with an average 0.7 point, up just a fraction from 3.64% a week ago.

This time last year, the benchmark mortgage rate sat at an average of 4.45%, more than three-quarters of a point higher than today's level.

Thirty-year mortgage rates for mid-January are the lowest in seven years, MoneyWise.com has found, by reviewing historical data from Freddie Mac.

Following the recent drama with Iran, investors began putting their money into safe-haven investments like U.S. Treasury bonds. As a result, prices of bonds went up, their yields (interest rates) went down — and mortgage rates dropped along with them.

Even with the announcement of a new U.S. trade deal with China, yields have barely recovered; many of the tariffs are still in place, and the situation hasn’t improved much for investors.

Use this calculator to see what kind of monthly payment you can expect from the current low rates.

Low rates bolster the housing market

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Many homebuyers and homeowners have been taking full advantage of today’s appealing rates. In early January mortgage applications increased by 30.2%, according to the Mortgage Bankers Association. Applications for refi loans skyrocketed by 43%, while “purchase applications” for loans to buy homes were the highest they’ve been in more than a decade.

If you took out a mortgage as recently as 2018, you may be able to trim down your monthly payment by refinancing into a new loan at a lower rate. Start by comparing today's best mortgage rates in your area.

Although borrowing and homebuying typically flag around the holidays and into the early part of the new year, things are different this time, says Richard Pisnoy, a principal with Silver Fin Capital Group, a residential and commercial mortgage broker in Great Neck, New York.

“We are not seeing the slowdown through the holiday seasons as we have seen in the past,” Pisnoy says. 

“This does not mean that the housing market in the spring and summer is not busier, but there has been a substantial slowdown in the past at this time of year," he says. "The low rates and a strong job market are having a significant effect on the housing market in a positive way."

What to expect from mortgage rates and housing

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Current predictions suggest mortgage rates should remain at historically low levels throughout 2020 and well into 2021, with 30-year fixed-rate mortgages averaging 3.8% according to the latest forecast from Freddie Mac.

It’s an excellent time to shop for a home, says Sam Khater, Freddie Mac’s chief economist.

“Mortgage rates remain low and, along with a strong job market, are fueling the consumer-driven economy by boosting purchasing power, which will certainly support housing market activity in the coming months,” Khater says.

Today's rock-bottom rates are good news for homebuilders, too, who are feeling more optimistic now than they have since the summer of 1999, according to a new National Association of Home Builders survey.

Even with mortgage rates so low, it’s important to lock in a good rate when you see one, since rates can always change without warning.

Other mortgage rates this weekend

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Rates on 15-year fixed-rate mortgages, which are a popular choice among homeowners who refinance, have crept up a tad to an average 3.09%, from 3.07% last week. At this time in 2019, 15-year mortgages were averaging 3.88%, Freddie Mac says.

Rates also have increased on 5/1 adjustable-rate mortgages, or ARMs, which remain level for five years and then can adjust up or down each subsequent year.

ARMs are currently being offered at an average initial rate of 3.39%, which is up from last weekend’s 3.30%. A year ago, the starter rates on ARMs were averaging 3.87%.

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