November 15th, 2020 11:49 AM by Jackie A. Graves, President
Mortgage rates are on the rise, according to a long-running survey, after positive news about a coronavirus vaccine had investors imagining an eventual return to a more normal way of life.
Markets were celebrating last week following an announcement that a vaccine could be just months away, and after the presidential race was called for Joe Biden. Experts think mortgage rates will continue to climb in the near term.
Homeowners may be running out of time to refinance and cut their monthly payments before rates sail any higher.
Mortgage rates also are offering huge savings to homebuyers, even in an unseasonably hot housing market.
Good news leads to a spike in rates
Mortgage rates last week were averaging 2.84% for a 30-year fixed-rate loan, up from the previous week's all-time low of 2.78%, mortgage company Freddie Mac said on Thursday.
Even with the jump, rates are peanuts compared to this time a year ago, when 30-year loans averaged 3.75%.
Monday’s announcement from drugmaker Pfizer that its COVID vaccine may be 90% effective was an unexpected revelation, says Matthew Speakman, an economist with Zillow.
"Bond yields jumped on the news,” Speakman says. “Mortgage rates followed suit, rising firmly in recent days." He adds that it’s a "stark reminder" that the pandemic — and our ability to fight it — will have a major influence on interest rates going forward.
Rates on other mortgages also have increased, the Freddie Mac survey shows.
The average for a 15-year fixed-rate mortgage rose to 2.34%, up from 2.32% a week earlier. These mortgages, often used for refinance loans, remain miles below last year when the average was 3.20%.
Rates on 5/1 adjustable-rate mortgages, or ARMs, surged to an average 3.11%, up from the previous week’s 2.89% but still far from last year’s 3.44%.
Millions still haven’t refinanced
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Homeowners are refinancing at a blazing pace, according to the Mortgage Bankers Association, with refi loan applications up 67% compared to a year ago.
But many are still watching from the sidelines — even as the clock is ticking on the lowest rates.
Some 18.5 million mortgage holders are in a good position to refi and save around $300 monthly, the mortgage data firm Black Knight said last week. Good refinance candidates include those with solid credit scores and at least 20% equity in their homes.
Homeowners need to trade in their loans before interest rates rise in general, and before a new 0.5% fee on most U.S. refinances officially takes effect on Dec. 1. Lenders are likely to pass along the cost by raising their refi rates; many have already done that.
If you wait too long and miss out on a deeply cheap rate, you’ll need to find savings elsewhere. A little comparison shopping can help you find a lower price on your homeowner's insurance that could save you more than $1,000 a year.
Low rates help combat higher home prices
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Fueled by historically low mortgage rates, demand for homes is still raging.
But new listings are lagging, possibly related to rising coronavirus cases, according to a report from Realtor.com. The research also suggests that, though buyers have been waiting for signs of a slowdown, prices "continue to defy gravity."
Weary buyers waiting for the market to cool could miss out on ultra-low rates.
Mortgage News Daily’s survey of lenders showed a sizable jump in 30-year mortgage rates early last week. Even so, “this leaves rates in territory that's still great by historical standards,” wrote Matthew Graham, the publication’s chief operating officer.
He adds there are questions about where things go from here. With rates likely to inch higher in the coming weeks, it could be time to lock a lower rate while you can.
Experts say buyers should gather and compare at least five rate quotes to find the best deal — because rates can vary sharply from one lender to the next.
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