Huge gift for borrowers: Mortgage rates bottom out ahead of the holidays

Huge gift for borrowers: mortgage rates are lowest before the holidays
Here's one big reason to be cheerful if you're a homeowner or homebuyer: mortgage rates are going on vacation at their lowest ever, down more than a full percentage point from a year, according to a popular poll.
Owners can get a greatly reduced monthly mortgage payment in the New Year by refinancing themselves at a much lower interest rate. Those hoping to have a new home in 2021 can face rising property prices with dirt cheap mortgage rates.
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The record lows are due to the fact that U.S. coronavirus cases continue to spiral out of control and Washington is trying to finalize a colossal COVID relief package. With all the uncertainty, it's difficult to predict whether today's extremely low interest rates will last.
Prices continue to shrink
Fariz Alikishibayov / Shutterstock
Mortgage rates on a 30-year fixed rate home loan averaged 2.66% this week, a tad less than last week's 2.67%, mortgage lender Freddie Mac said Thursday.
It's the 16th time this year that interest rates have hit an all-time low, says the mortgage giant, which started keeping records nearly 50 years ago. At that time, mortgage rates averaged 3.74% last year, well over a full percentage point above today's level.
"The real estate market is poised to end the year strong as low mortgage rates continue to fuel home buyer demand and refinancing activity," said Sam Khater, Freddie Mac's chief economist.
Outside of the real estate market, however, the economy continues to be held back by new lockdowns across the country. According to the government, another 803,000 Americans filed for unemployment last week and 12 million are at risk of losing their unemployment benefits the day after Christmas.
COVID is the key to interest rates
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But it's the ongoing health crisis that will have the biggest impact on rates through 2021, says Khater.
"The main driver in the near future will be the course of the COVID-19 pandemic and the execution of the vaccine," he says.
Interest rates on other popular home loans also fell this week, Freddie Mac's survey shows.
The average for a 15-year fixed-rate mortgage - a popular loan option for refinancing - fell to a record low of 2.19% from 2.21% last week. These loans are now down a full percentage point from the same period last year.
For variable rate 5/1 mortgages or ARMs, the current average is unchanged from last week at 2.79% and thus well below the previous year's average of 3.45%.
This is how you save the most on your mortgage
Dragana Gordic / Shutterstock
According to the Mortgage Bankers Association, many homeowners have unpacked shiny new mortgages with rock-bottom rates as refi inquiries are 124% higher than a year ago.
But even after months and months of falling rates, many still hesitate. Refinancing now could save more than 19 million mortgage holders an average of $ 308 per month, according to Black Knight.
The mortgage technology and data provider says homeowners with solid credit scores and at least 20% home equity are excellent refi candidates.
The best way to get an ultra low lowest rate? You have to shop for a few minutes as some lenders have increased their refinance rates to accommodate a 0.5% refi loan fee that went into effect on December 1st.
If you compare at least five interest rates, studies have a good chance of saving thousands of dollars over the life of your loan.
If you wait too long and miss the lowest prices ever, there are other ways to cut your housing costs. When it's time to buy or renew homeowners insurance, seek quotes from multiple insurers to get the lowest price on the coverage you need.

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