Mortgage rates jump biggest in 8 weeks as refinancing clock ticks

Mortgage rates jump biggest in 8 weeks as refinancing clock ticks

Despite a new wave of COVID-19 straining the economy, a long-standing survey shows mortgage rates to post their biggest increase in eight weeks.

Analysts say rates have jumped on an encouraging report on hiring in the United States.

Experts warn that once the economy is back on track, the low rate genius could return to the bottle, taking advantage of today’s unprecedented opportunity to save big with mortgage refinancing.

30-year mortgage rates

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The average rate on a 30-year fixed mortgage fell from 2.77% to 2.87% last week, mortgage giant Freddie Mac reported Thursday.

Around the same time last year, during the first break in America’s COVID nightmare, 30-year fixed-rate mortgages averaged 2.96%.

Rates are now the highest in a month and the week-over-week jump is the biggest since June 24, when the average fell from 2.93% to 3.02%.

“Despite the hike, rates remain very low,” notes Sam Khater, chief economist at Freddie Mac.

When mortgage rates were at about the same levels a month ago, mortgage data and technology company Black Knight told MoneyWise that 13.9 million homeowners could save an average of $ 293 per month by refinancing.

15-year mortgage rates

The average rate on 15-year fixed-rate mortgages edged up last week, to 2.15% from 2.10% the week before, which was an all-time low.

Fifteen year mortgages are a popular choice for refinance loans. The shorter term means that homeowners pay much less interest, allowing them to pay off their mortgages faster and more cheaply.

A year ago, the 15-year fixed rate was averaging 2.46%.

5/1 adjustable mortgage rates

ARM adjustable rate mortgage papers in the office.

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The cost of 5/1 variable rate mortgages, or ARMs, has also increased.

A 5/1 ARM had an average introductory interest rate of 2.44% last week, down from 2.40% the week before. Around the same time last year, 5/1 ARMs were considerably more expensive, with an average rate of 2.90%.

Variable rate mortgages have two phases. For the former, you pay a fixed interest rate which is generally lower than what you would have to pay on a 30 year fixed rate loan. Once this period is over, your ARM rate will adjust, up or down, at regular intervals.

An ARM 5/1 would charge you the same mortgage rate for the first five years. After that, your rate will be adjusted every (one) year.

Experts believe mortgage rates will continue to rise

The recent rate hike is attributed to the government’s positive jobs report released earlier this month. It showed that 943,000 new, better-than-expected jobs were created in July and the unemployment rate fell last month from 5.9% to 5.4%.

Freddie Mac’s Khater calls economic growth in the United States “strong” and predicts that it will continue until 2022. If so, every piece of good news could push mortgage rates higher. Senior Economist George Ratiu expects mortgage rates to “rebound below 3%” until the Federal Reserve starts cutting one of its anti-government measures. COVID which helped keep rates low. Namely, the Fed bought billions of mortgage-backed securities every month.

“I expect a monetary cut will push mortgage rates up, probably towards the end of the year,” Ratiu said.

How to get a low mortgage rate while you can

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At that point, the boom in low rates for mortgage borrowers could end, meaning time is running out for homeowners considering an economic refi. If you decide it’s time to refinance, follow these steps to get the best deal from a lender.

The lowest rates usually go to borrowers with the strongest credit, so take a look at your credit score and see how it compares. Checking your credit score is quick and easy – and can be free – so take a look and see if you need to improve your creditworthiness before contacting lenders.

Mortgage lenders may hesitate if you already have a lot of high interest debt, including credit cards. Consider converting these balances into a low interest debt consolidation loan. You’ll reduce your interest costs and eliminate your debt faster.

Once it’s time to shop for a mortgage, collect offers from multiple lenders to find the best rate for your area and for someone with your credit profile. Studies by Freddie Mac and others have shown that comparing five or more offers is key to getting the most favorable rate on a mortgage.

A little price comparison could also help you find a better deal on your home insurance.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

About Mary Moser

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