According to a popular survey conducted around 1971, mortgage rates have dropped to record – for Ninth time in 2020. Mortgage company Freddie Mac says that this week’s survey has only 2.86% average mortgages.
If you want to buy a house or you are thinking of refinancing your mortgage, you think you have plenty of time to hammer out that kind of super-low rate. Ultimately, the Federal Reserve has said it will keep interest rates close to zero for years.
But mortgage rates are likely to remain substantially cheaper by historical standards as long as this is correct, all-time-low rates may end soon. Borrowers who wait a few weeks can wind up with higher monthly payments and much higher lifetime interest costs.
There is a new charge
Lenders are expected to raise their rates further as Freddie Mac and Fannie Mae have imposed real fees this time.
Most US home loan buying or guaranteeing government-sponsored companies initially told lenders in mid-August that the refinance would be effective at 0.5% of Sept 1 on the loan. And, the lenders opted out.
Within two days, the average rate for a 30-year fixed-rate mortgage rose from 2.92% to 3.14%, according to Mortgage News Daily. Rates cooled down again in late August, when the regulatory agency of Fannie and Freddie halted the fee until 1 December.
Zillow economist Matthew Speakman says the surcharge means that this mortgage rate could “rise substantially” and before you can think.
“Even though the adjustment will not be officially implemented until December 1, lenders are likely to start applying it to the loan as of October, meaning the effect of the adjustment will likely be reflected in the rate quote within a few weeks ,” He writes.
This means that homebuyers are looking to make a purchase, and homeowners willing to refinance should quickly close the low mortgage rate.
How much will the rates increase?
Fannie Mae and Freddie Mac say they need revenue to cover what they are calling “unfavorable market fees” to cover losses from defaults and other issues related to the coronavirus financial crisis.
The chief operating officer of Mortgage News Daily, Matthew Graham, says as fees become a commodity, it is likely to increase mortgage rates by a quarter to one-quarter of 1 percentage point (0.125 to 0.25). In other words, today’s 30-year rate will increase to 3.10% at a rate of about 2.85%.
“While it may not seem important, it is the biggest change of its kind,” says Graham.
What would this difference mean for the borrower:
- A $ 250,000 30-year fixed-rate mortgage at 2.85% will have monthly principal and interest payments $ 1,033. Borrower will pay more $ 122,000 Over 30 years.
- The $ 250,000 30-year fixed-rate mortgage at 3.10% will have monthly principal and interest payments $ 1,067. Borrower will pay more $ 134,000 Over 30 years.
With the rate hike, you will pay an additional $ 408 a year – and an additional $ 12,000 over time. Graham says borrowers have “cases forcing locking”.
But first, you’ve got a lower rate and the lender that will give it to you. To uncover the best deal in your area and for a person with your credit score, get a mortgage offer from a group of lenders and compare them.
If your comparison shopping is successful, remember that when you buy or renew your homeowners insurance. Look for rate quotes from many insurers and look at their side, so that you need coverage without paying too much.