August 30th, 2020 11:44 AM by Jackie A. Graves, President
The last few weeks it's felt like mortgage rates were on a roller coaster at a summer carnival (before social distancing, of course).
They went up for a few weeks after lenders were blindsided by a new fee on refinancing loans, but now rates are potentially closing in on new all-time lows, a weekly survey shows.
Lenders had jacked up their mortgage rates in response to the new surcharge, but the fee has now been delayed &mdash, and rates have been pulled back.
Homeowners have more time to take advantage of today's deeply cheap mortgage rates, which can save them hundreds of dollars a month when they refinance. Homebuyers are still getting deals, too.
Fee reversal puts mortgage rates near record territory
Mortgage rates have dropped to an average 2.91% for a 30-year fixed-rate loan, down from 2.99% a week earlier, mortgage company Freddie Mac reported on Thursday.
A year ago, the typical rate was 3.58%. The loans in Freddie Mac's survey come with an average 0.8 point.
Rates are now just a couple of notches above their all-time low from early this month in the survey, which has been tracking mortgage rates for nearly half a century. Thirty-year fixed-rate mortgages hit an average of just 2.88% on Aug. 6.
But it was less than a week later that mortgage rates jumped following surprising news from Freddie Mac and Fannie Mae, which are government-sponsored mortgage giants that buy or back most U.S. home loans. The companies announced that on Sept. 1, they'd start charging a new 0.5% fee on refinancing mortgages.
They said they needed the additional revenue because they expect to lose billions of dollars due to the coronavirus recession.
Lenders reacted to the announcement by boosting their rates to begin offsetting the surcharge, which the Mortgage Bankers Association said would cost the average borrower an extra $1,400.
After protests from the mortgage bankers and others, the federal agency that regulates Fannie and Freddie said last Tuesday that it would put the fee on hold until Dec. 1.
And mortgage rates came back down.
Ultra-low mortgage rates may not last long
Rates are again at a level that would allow roughly 18 million homeowners to save an average $287 a month by refinancing, according to data from the mortgage research firm Black Knight.
The decline in mortgage rates also is benefiting homebuyers, who are currently making up for time lost last spring when COVID-19 lockdowns were widespread.
"Driven by low rates, low inventory, a recovering economy and a fundamental desire to live in a house and neighborhood that suits the new reality of primarily working from home, buyers are active," says Corey Burr, senior vice president at TTR Sotheby's International Realty in Chevy Chase, Maryland.
But if you're thinking of buying a home, or if you're a homeowner who could save big through a refinance, you may need to move quickly — before that refi fee starts having an impact on mortgage rates again.
Though it's been delayed until December, experts say the fee could begin driving rates higher by October, when lenders begin preparing for the implementation.
So, start shopping around for a bargain loan now. Get mortgage offers from at least five lenders and compare them, to find the lowest rate available to you based on your location and your credit profile.
Be sure to take a similar approach with your homeowner's insurance. When it's time to buy or renew your policy, go online, and seek rate quotes from several insurance companies to be confident you're paying the best price for your coverage.
What other mortgage rates are doing
The latest Freddie Mac survey shows rates on other popular types of mortgages are mixed.
The average for a 15-year fixed-rate mortgage has dropped to 2.46%, from 2.54% the previous week. Fifteen-year mortgages are a popular choice for refinancing loans, and the rates are down considerably from last year at this time when the average was 3.06%.
Meanwhile, rates on 5/1 adjustable-rate mortgages, or "ARMS," are unchanged. The rates on those loans are fixed for five years, then can adjust up or down every year, depending on what other interest rates are doing.
ARMs are currently being offered at starter rates averaging 2.91%, same as they were during the week of Aug. 20.
At this time in 2019, the typical initial rate on a 5/1 ARM was 3.31%.
To view the original article click here