The cost of America’s most popular mortgage has fallen to its lowest level in nearly three months, a long-running survey shows.
That means spring home shoppers now have a second shot at some of the cheapest money ever to be had in the mortgage market, following a series of steep hikes early in the year.
And if you already own a home, it means you still have a window to save hundreds a month by refinancing your existing loan.
The average interest rate on a 30-year fixed loan has slipped to 2.96%, mortgage giant Freddie Mac reported Thursday.
That bargain rate — the lowest since mid-February — was down from 2.98% a week earlier. A year ago at this time, the average was 3.26%.
With the most recent drop, 30-year fixed mortgages have now remained under 3% for three straight weeks. The return of historically low rates is welcome news for homebuyers, says Sam Khater, Freddie Mac’s chief economist.
"It’s also good for homeowners who may have missed prior opportunities to refinance and increase their monthly cash flow," Khater says.
Black Knight, a mortgage technology and data provider, says 13 million mortgage holders stand to save an average $283 each month by refinancing.
The average rate on a 15-year fixed-rate mortgage dipped slightly last week to 2.30%, down from 2.31% the previous week, Freddie Mac says.
These shorter-term mortgages are a popular option for borrowers who can afford higher monthly payments or are refinancing to slash their interest costs.
A year ago, the 15-year fixed rate was averaging 2.73%.
5/1 adjustable-rate mortgages
The average rate on a 5/1 adjustable-rate mortgage hit 2.7% last week, up from its lowest level in years: just 2.64%. Last year, the average 5/1 rate was 3.14%.
Adjustable-rate mortgages generally start out with lower rates than their fixed-rate counterparts, but after a period of time the rates “adjust.” In other words, they move up or down in sync with the prime rate or another benchmark.
A 5/1 ARM has a fixed rate for five years and then adjusts every (one) year after that.
Get ready for more homes to hit the market
With so few homes up for sale during the pandemic, competition has been scorching hot across the country. Bidding wars are driving up prices that were already uncomfortably high.
But now, would-be buyers stuck on the sidelines may have a chance to jump in.
George Ratiu, senior economist for Realtor.com, says recent data shows the number of sellers choosing to list their homes is growing as more states ease COVID-19 restrictions.
“For first-time homebuyers, rising inventory and low interest rates open the window of opportunity wider as we move through May, hinting that we might see price gains begin to moderate,” he says in a statement.
Tips to find the lowest rates
If you’re eager to land a cheap rate before they rise again, the first step is to make sure you have a solid credit score. If you don’t know what your score is, it’s easy these days to take a peek at your credit score for free.
Then, to ensure you maximize your savings, you have to shop around. Studies have shown that getting mortgage offers from multiple lenders — five at a minimum — can mean paying thousands less over time.
And while you’re shopping around, consider gathering quotes from multiple insurers, too. It’s easy to fixate on mortgage rates, but a lower premium on your homeowners insurance will also translate into major savings in the long run.