Fixed mortgage rates didn’t move much this week, but they declined enough to reach another record low, marking the third time this month and the 16th time this year they have hit historic lows.
The 30-year fixed-rate average, the most popular mortgage product, sank to 2.66% with an average 0.7 point, according to the latest data released Thursday by Freddie Mac. (Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.) It was 2.67% a week ago and 3.74% a year ago.
The 30-year fixed rate has never been this low since Freddie Mac began tracking mortgage rates in 1971. It surpassed the previous low of 2.67% set last week. Since the start of 2020, the 30-year rate has fallen more than a percentage point, going from 3.72% in January to 2.66% this week.
Freddie Mac, the federally chartered mortgage investor, aggregates rates from around 80 lenders across the country to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. These rates are not available to every borrower.
Because the survey is based on home purchase mortgages, rates for refinances may be different. This is especially true since the price adjustment for refinance transactions went into effect earlier this month. The adjustment is 0.5% of the loan amount (e.g., it is $1,500 on a $300,000 loan) and applies to all Fannie Mae and Freddie Mac refinances.
The 15-year fixed-rate average dropped to 2.19% with an average 0.5 point. It was 2.21% a week ago and 3.19% a year ago. The five-year adjustable rate average was unchanged at 2.79% with an average 0.2 point. It was 3.45% a year ago.
“Mortgage rates were little changed this week as markets digested the authorization of a second coronavirus vaccine and $900 billion stimulus package,” said Danielle Hale, Realtor.com’s chief economist. “Taking a broader look, mortgage rates have steadily declined over the last 12 months and are currently more than a whole percentage point lower than this time last year.”
When it comes to the mortgage market, the week between Christmas and New Year’s is typically quiet. With many lenders off for the holidays, rates don’t tend to make big moves. However, with President Donald Trump throwing a wrench into the stimulus package and investors concerned about recent economic data showing a decline in consumer spending and income, rates may continue to seek new lows.
However, Bankrate.com, which puts out a weekly mortgage rate trend index, found nearly half the experts it surveyed predicted rates would stay about the same in the coming week, while 40% expected them to rise.
Jennifer Kouchis, senior vice president of real estate investing at VyStar Credit Union in Jacksonville, Fla., is one who says they will hold steady.
“With the holidays upon us, I think rates will remain on a sideways trend,” she said. “My immediate guess is that rates will continue to ignore market indicators and will hold pretty firm until year-end with minimum movement expected.”
Meanwhile, mortgages applications were flat last week. According to the latest data from the Mortgage Bankers Association, the market composite index – a measure of total loan application volume – increased 0.8% from a week earlier. The purchase index fell 5% from the previous week but was 26% higher than a year ago. The refinance index rose 4% and was 124% higher than a year ago. The refinance share of mortgage activity accounted for 74.8% of applications.
“Last week’s increase in refinance applications was driven by FHA and VA activity, while conventional refinances saw a slight decline,” said Joel Kan, an MBA economist. “Purchase applications decreased for the second time in three weeks, as both conventional and government applications saw a drop-off . . . and the average loan balance reached another record high.”