Mortgage rates slide to historic lows for third time this month

The 30-year fixed rate has never been this low since Freddie Mac began tracking mortgage rates in 1971. It surpassed the previous low of 2.67 percent set last week. Since the start of 2020, the 30-year rate has fallen more than a percentage point, going from 3.72 percent in January to 2.66 percent this week.

Freddie Mac, the federally chartered mortgage investor, aggregates rates from around 80 lenders across the country to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. These rates are not available to every borrower.

Because the survey is based on home purchase mortgages, rates for refinances may be different. This is especially true since the price adjustment for refinance transactions went into effect earlier this month. The adjustment is 0.5 percent of the loan amount (e.g., it is $1,500 on a $300,000 loan) and applies to all Fannie Mae and Freddie Mac refinances.

The 15-year fixed-rate average dropped to 2.19 percent with an average 0.5 point. It was 2.21 percent a week ago and 3.19 percent a year ago. The five-year adjustable rate average was unchanged at 2.79 percent with an average 0.2 point. It was 3.45 percent a year ago.

“Mortgage rates were little changed this week as markets digested the authorization of a second coronavirus vaccine and $900 billion stimulus package,” said Danielle Hale, Realtor.com’s chief economist. “Taking a broader look, mortgage rates have steadily declined over the last 12 months and are currently more than a whole percentage point lower than this time last year.”

When it comes to the mortgage market, the week between Christmas and New Year’s is typically quiet. With many lenders off for the holidays, rates don’t tend to make big moves. However, with President Trump throwing a wrench into the stimulus package and investors concerned about recent economic data showing a decline in consumer spending and income, rates may continue to seek new lows.

Jennifer Kouchis, senior vice president of real estate investing at VyStar Credit Union in Jacksonville, Fla., is one who says they will hold steady.

“With the holidays upon us, I think rates will remain on a sideways trend,” she said. “My immediate guess is that rates will continue to ignore market indicators and will hold pretty firm until year-end with minimum movement expected.”

Meanwhile, mortgages applications were flat last week. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 0.8 percent from a week earlier. The purchase index fell 5 percent from the previous week but was 26 percent higher than a year ago. The refinance index rose 4 percent and was 124 percent higher than a year ago. The refinance share of mortgage activity accounted for 74.8 percent of applications.

“Last week’s increase in refinance applications was driven by FHA and VA activity, while conventional refinances saw a slight decline,” said Joel Kan, an MBA economist. “Purchase applications decreased for the second time in three weeks, as both conventional and government applications saw a drop-off … and the average loan balance reached another record high.”