According to Freddie Mac's Primary Mortgage Market Survey, the average 30-year fixed-rate mortgage (FRM) for the week ending January 7th was 2.67%, down from last weeks' 2.71%. This marks the lowest level ever reported since the survey began in 1971.
The lower rates are expected to continue through the first quarter of 2021, meaning potential buyers have extra incentive to get into the market. This is especially advantageous for those looking to purchase or refinance a home with an adjustable-rate mortgage (ARM). ARMs generally offer lower fixed rates as compared to FRMs, however, they come with a potential for interest rate adjustments once the introductory period ends.
The drop in mortgage rates could be attributed to ongoing efforts to contain the spread of coronavirus and the recent passage of the Cares Act. This act provides additional assistance for federal loan borrowers and greatly expands unemployment benefits for individuals impacted by the pandemic. With more financial protection in place, lenders may be more likely to approve mortgage refinancing.
In addition to the low mortgage rates, buyers can benefit from higher housing prices. The Federal Reserve’s measure of average house prices via their Case-Shiller Index rose 2.3% in November 2020, while home sales increased 5.6%. This suggests that more borrowers are taking advantage of the unprecedented rate environment and choosing to invest in property.
The current low mortgage rate environment is presenting borrowers with an opportunity to save on their purchase or refinance transaction. Due to the passage of the Cares Act, lenders may be more likely to approve mortgage refinancing, and in combination with higher house prices, more homeowners are taking advantage of the low interest rates. This trend is expected to continue through the first quarter of 2021.
This article was contributed on Nov 23, 2023
