Prepared by Dan Green, Mortgage Market Expert
Freddie Mac: Mortgage Rates Now Average 3.66%
Mortgage rates are dropping, according to Freddie Mac.
According to the federal agency’s Primary Mortgage Market Survey (PMMS), 30-year mortgage rates for conventional loans fell to 3.66%, on average, nationwide last week.
After peaking in mid-March, rates are down close to one-quarter percentage point since.
Interest rates dropped for other loan types last week, too. Rates for FHA loans, USDA loans, and VA loans each improved. VA mortgage rates remain the “cheapest” of the lot.
It’s an excellent time to refinance your home, or make the purchase of a new one. Mortgage rates and APRs are firmly in the 3s and mortgage lenders are approving more loans nationwide.
30-Year Mortgage Rates Lowest In 10 Weeks
The average 30-year fixed-rate conventional mortgage rate slid 4 basis points (o.04%) this week to reach 3.70 percent, on average, nationwide.
The rate — which is based on a survey of 125 U.S. lenders — is available to borrowers willing to pay 0.6 discount points at closing, plus a full set of closing costs.
Closing costs vary by state and are highest in Texas, Alaska, and New York. Costs are lowest in Tennessee and Nevada.
Borrowers can elect to “waive” closing costs via a zero-closing cost home refinance in which the lender pays costs on a borrower’s behalf in exchange for a slightly higher mortgage rate.
A zero-closing cost mortgage typically raises the rate on a $250,000 home loan by one-quarter point.
Freddie Mac reports that 15-year mortgage rates dropped last week, too. The popular, shorter-termed loan shed 5 basis points (0.05%) to 2.93%, on average, nationwide.
Freddie Mac’s published rates are available to prime mortgage borrowers.
A “prime borrower” is defined as one with a credit score of 740 or higher; with a purchase downpayment of twenty percent or more; with a debt-to-income ratio which meets mortgage guidelines; and, with ample reserves to support a mortgage approval.
Loans for prime borrowers are loans made against single-family residences including detached homes, certain town homes and attached properties; and condos which meet minimum eligibility standards.
The Freddie Mac survey does not reflect FHA mortgage rates or VA mortgage rates, nor does it show rates the for no-money-down USDA loan. Freddie Mac’s figures are for conventional loans only.
Millions Now “In The Money” To Refinance
Freddie Mac puts this week’s average mortgage rate at 3.66% which, in historical context, is dirt-cheap. Since 1971, 30-year rates have averaged closer to 8.25%.
However, it’s not just in a historical context that mortgage rates are cheap — they’re also cheap as compared to just last year. As a result, literally millions of U.S. homeowners are in the money to refinance.
When you’re “in the money” to refinance, it means that you stand to reduce your mortgage rate by 150 basis points (1.5%); you have at least $50,000 remaining on your loan balance; and, your loan has at least 10 more years until it’s paid off.
Furthermore, there are huge numbers of homeowners not in the money in the strictest sense of the definition, but whose current mortgage rate is more than 50 basis points (0.50%) higher than today’s rates.
Plus, with home values rising, banks have been more willing to approve refinance applications as they’re coming in. According to data from Ellie Mae, closing rates for refinance and purchase loans are several points higher than what they were even just last year.
Some of the common refinance loans homeowners have been using include:
- The Home Affordable Refinance Program (HARP) : For homeowners with underwater conventional loans which pre-date June 2009
- The 97 LTV loan : For homeowners with conventional loans and 3% home equity or more
- The FHA Streamline Refinance : For homeowners with an existing FHA loan who want to lower their mortgage rate and payment
- The VA Streamline Refinance : For homeowners with an existing VA loans who want to lower their mortgage rate and payment
- The USDA Streamline Refinance : For homeowners with an existing USDA loan who want to lower their mortgage rate and payment
- The Conventional Refinance : For homeowners with at least 10% home equity wanting to refinance a conventional loan, or to refinance to cancel FHA MIP
Current Freddie Mac data shows that the median age of a refinanced mortgage was 6.8 years last quarter. The typical refinancing homeowner, therefore, lowered its mortgage rate 250 basis points (2.50%), which yields an annual savings of more than 35 percent.
That’s a huge number. And, don’t be concerned for closing costs, either.
Long-term, a refinance to low interest rates will save more money than it costs — especially when the refinance is a zero-closing cost refinance.
Homeowners who refinanced last year will save $5 billion combined during the first 12 months of payments. With 2015 mortgage rates dropping, this year’s refinancing homeowners will save even more.
It’s an excellent time to explore your refinance options.