Interest Rates Are Their Lowest in 6 Months
Last week interest rates reached their lowest point in 6 months, according to Freddie Mac’s latest Primary Mortgage Market Survey. For the week of May 8th, rates fell to an average of 4.21%, the lowest they’ve been since the week of November 7th last year when they were 4.16%.
This year, rates have fallen from their peak in January of 4.53% and been fluctuating each week since the beginning of April. The drop in rates follow Federal Reserve Chair Janet Yellen’s remarks before the Joint Economic Committee where she said low interest rates would most likely continue. Yellen said although the economy was showing signs of strengthening, even after an unusually harsh winter, there are concerns about flattening home sales as well as recent global tensions, making the Fed cautious about rate hikes.
Good News for Home Buyers
These low rates are good news for home buyers. In January when the average conventional rate at 4.53%, a monthly payment on a $350,000 loan would be $ 1,780. With today’s rate of 4.21%, the monthly loan would drop to $1,714, a difference of $66 a month.
Low rates have also triggered a 5.3% increase in mortgage applications. The Mortgage Bankers Association reported there were more mortgage applications to buy a home than to refinance a home, the first time this has happened since 2009.
Mortgage rates for so-called jumbo loans (loans above the loan limits set by Fannie Mae and Freddie Mac) are actually lower than conforming mortgage rates. Today’s rate for a jumbo 30 year fixed is 3.99% in comparison to 4.21% for a 30 year conforming loan.
Which means home buyers who have good credit and a large down payment and who borrow a little more can get a lower interest rate. Conforming loans have become more expensive because Fannie Mae and Freddie Mac have raised their fees they charge to lenders.
Rates were expected to rise to 5.5% by the end of the year, but Freddie Mac Chief Economist Frank Nothaft said rates would go up gradually, and expects them to rise only between 4.6% and 4.7% by the end of the year.