Mortgage rates are hanging around their recent all-time low, according to a popular survey, and borrowers may continue to benefit from cheap, steady rates at least through the presidential election.
The ultra-low rates are keeping the housing market unseasonably competitive during a period when it typically slows.
Experts say mortgage rates aren’t likely to see much movement as the financial markets wait for news about the vote, and about whether there will be another COVID-19 relief package to stimulate the struggling economy.
That means homebuyers and homeowners still have time to take advantage of this year's history-making mortgage rates.
Rates drift back down
Mortgage rates dropped slightly last week to an average 2.88% for a 30-year fixed-rate loan, from the previous week’s 2.90%, mortgage company Freddie Mac said on Thursday.
That’s just above the record-low 2.86% from three weeks ago. Last year at this time, 30-year fixed-rate mortgages were averaging 3.65%
“The overall consistency in mortgage rates is largely attributed to unanswered political questions — whether or not there will be another stimulus and what the upcoming presidential election could mean for markets,” says Danielle Hale, chief economist with Realtor.com.
The Freddie Mac survey shows rates on other popular types of mortgages also dipped last week.
The average for a 15-year fixed-rate mortgage decreased to 2.36%, from 2.40% a week earlier. Rates on those mortgages, often used for refinance loans, are down sharply from last year, when the average was 3.14%.
Rates on 5/1 adjustable-rate mortgages, or ARMS, were unchanged and averaging 2.90%, down considerably from last year’s 3.38%.
Low rates make home sales soar
Favorable mortgage rates are continuing to pump up home sales, even while the inventory of houses for sale reaches new lows.
The number of homes on the market was down 39% year over year in September, according to Realtor.com. The U.S. median home price is up more than 11% compared to last year.
“We’re seeing potential homebuyers who now have more purchasing power and many current homeowners who have the option to refinance their loan for a better rate,” says Sam Khater, Freddie Mac’s chief economist.
"However, several factors could disrupt this activity including high home prices, low inventory and lender capacity," he says.
A report from the Mortgage Bankers Association suggests lenders may already be at capacity in the amount of business they can handle.
But Realtor's Hale says rates will most likely remain deeply low for the next few months, which will help homebuyers counter the rising prices.
Lock in a low rate while you can
An incoming fee on mortgage refinancing could push rates higher later this fall.
We saw a preview in mid-August, as rates soared when the 0.5% fee was first announced for Sept. 1. When a federal regulatory agency delayed it by three months, rates dropped back down.
But experts already have observed lenders passing the cost on to consumers by raising refi rates. That means the time is now for homeowners to lock in the best rates for refinancing their mortgages. An estimated 19.3 million mortgage holders could lower their interest rates to reduce their monthly payments by an average $299 a month, mortgage data firm Black Knight recently reported.
Get the best mortgage rates by shopping around; borrowers who get five rate quotes save an average of $3,000 more than those who get just one quote, a Freddie Mac study found.