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Mortgage rates are below 3% for the second week in a row. The average rate on a 30 year fixed rate mortgage rose 1 basis point to 2.98%.
Today’s low rates come just a day after Fed Chairman Jerome Powell said so at the recent Federal Open Market Committee meeting There are no plans to rejuvenate buying mortgage-backed securities, a key to keeping interest rates down.
The Fed’s monetary policy of buying Treasury securities for at least $ 80 billion per month and mortgage-backed securities from agencies for at least $ 40 billion per month has been in place since the coronavirus pandemic began.
“The increase in our balance sheet since March 2020 has eased the financial conditions considerably and supports the economy considerably. The economy is far from our goals and it will likely take some time to make significant further progress, “Powell said at the press conference following the FOMC meeting.
The Fed’s announcement could keep rates low in the coming days, but key economic indicators like the first quarter GDP report – up to an annualized rate of 6.4% – could raise mortgage rates, says Matthew Speakman, an economist at Zillow.
“Looking ahead, with a number of key economic reports on the horizon – including consumer spending and inflation data – the relatively subdued mortgage rate activity of the past few weeks could move into more significant moves.”
Homeowners have another refinancing option
In early March we seemed to be on our way to keeping mortgage rates below 3% in the dust. By April, interest rates were up to 3.18%, shrinking the pool of borrowers who could save money by refinancing.
But just a few weeks later, interest rates have dropped back to the high 2% range, giving many borrowers another attempt at saving money.
Although interest rates are now lower than they were last year around this time, refinancing activity has cooled. According to the Mortgage Bankers Association (MBA) weekly mortgage application survey for the week ending April 23, 2021, applications were down 18% year over year.
“Even with a few weeks of lower interest rates, most borrowers are likely to have funded themselves, so activity has declined in seven of the last eight weeks,” said Joel Kan, associate vice president of economic and industrial forecasting for MBA.
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30 year fixed rate mortgage
The benchmark’s 30-year fixed-rate mortgage average rate increased 1 basis point from last week to 2.98% Freddie Mac’s Primary Mortgage Market Survey. Last year, the 30-year fix was 3.23%.
Borrowers with a 30-year fixed-rate mortgage of $ 300,000 and a current rate of 2.98% would pay $ 1,261.58 a month in principal and interest (taxes and fees not included) Forbes Advisor Mortgage Calculator shows. The total interest paid over the life of the loan would be $ 154,168.24.
The same mortgage taken out a year ago would cost an additional $ 14,669.91 in interest over the life of the loan.
15 year fixed rate mortgage
The average rate on the 15-year fixed-rate mortgage rose 2 basis points this week to 2.31%. Last year around this time, the 15-year fixed-rate mortgage was 2.77%.
Borrowers with a 15-year fixed-rate mortgage of $ 300,000 at today’s rate of 2.31% would pay $ 1,973.65 a month in principal and interest (taxes and fees not included). The total interest paid over the life of the loan would be $ 55,256.36.
The average rate on a 5/1 variable rate mortgage fell 19 basis points to 2.64%. Last year, the 5/1 ARM was 3.14%.
POOR are home loans with an interest rate that fluctuates with the market. With 5/1 ARMs, the first five years have a fixed interest rate and then switch to a variable interest rate. That is, if the average rate goes up or down, so will your rate.
ARMs traditionally have lower interest rates than fixed income options, making them an attractive choice for borrowers looking to sell before the fixed time period expires.
What low interest rates mean for borrowers
Mortgage rates are at record lows so this could be an opportune time for many people looking to save or save money on a new home loan Refinance your existing mortgage.
Borrowers who want to get the lowest rate should make sure they have a credit score of at least 760. Lenders keep their extremely low interest rates for those with a strong credit profile as this is a key indicator that borrowers are at low risk of late payments or default. In fact, borrowers with lower credit scores may be charged a percentage point or more than borrowers with very good or excellent scores.
Before you apply for a mortgage, Check your credit score. You can do this for free at many banks and credit cards. One way to improve your score relatively quickly is to pay off debts. You can also request credit for paying monthly bills on time, such as: B. Your internet or utility bills.
In addition to your credit score, lenders will consider yours Debt-Income Ratioor DTI. This is your total monthly debt divided by your gross monthly income. It’s basically a snapshot of how much you owe and how much you are making. The lower your DTI, the better your chances of getting a lower interest rate. Most lenders require a DTI of at least 43% to qualify for a mortgage or refinance.
Finally, studies have shown that people who shop tend to get lower interest rates than those who get a mortgage from the first lender they speak to. Find out the current average interest rate, as well as your credit history, income, debts, and expenses, before you begin your application. If lenders offer you an interest rate that is higher than expected, be sure to ask them why you can start improving these areas in order to qualify for a lower interest rate.