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Mortgage rates have declined a bit over the past week according to most sources, but demand seems to be weakening as we head into the Thanksgiving holiday week.
According to The Ascent's mortgage tracking methodology, the current average 30-year fixed-rate mortgage has an interest rate of 2.84%, which is a slight decrease from a week ago. The 15-year and 5/1 ARM rates currently average 2.359% and 3.492%, respectively.
With that in mind, there are a few different mortgage rate surveys and each one uses a slightly different methodology, so let's take a look at a couple. The two most widely referenced mortgage rate surveys are published by the Mortgage Bankers Association and Freddie Mac, and these track other trends such as mortgage application volume, so here's a quick look at each of these.
According to the Mortgage Bankers Association, the average rate on a 30-year fixed-rate mortgage for the week ending Oct. 30 was 2.99%, which is a virtually negligible 0.01% increase from last week's 2.98% average. The average borrower now pays 0.37 points when obtaining a new 30-year fixed-rate mortgage, which is also slightly up from 0.35 points on average a week ago. (Note: In mortgage terms, a "point" is equal to one percent of a mortgage loan amount, so 0.37 points translates to $370 for every $100,000 borrowed.)
The Mortgage Bankers Association survey also looks at mortgage demand, and loan application volume has declined a bit as we head into Thanksgiving week. Purchase mortgage application volume fell 1% last week and refinancing volume decreased 2%.
There are two caveats, however. There's a component of seasonality in the real estate market, and when adjusting for this, overall application volume dropped just 0.3%. And while the numbers represent a weekly decline, purchase and refinancing applications are 26% and 98% higher than they were a year ago, respectively.
In Freddie Mac's Nov. 19 mortgage rates survey, the average rate on a 30-year fixed-rate loan decreased significantly to 2.72% from 2.84% a week ago, with the average borrower paying 0.7 points. For a 15-year fixed-rate loan, which typically has a lower borrowing cost, the average applicant received a 2.28% interest rate and paid 0.6 points, a decline from the 2.34% national average a week ago.
How have rates changed this week?
The takeaway is that mortgage rates are holding steady near all-time lows or are declining slightly, but that doesn't seem to be enough to keep volume rising. Seasonality aside, we could be seeing the increasing COVID-19 cases and threats of more lockdowns causing borrowers to be a little more cautious and pump the brakes on borrowing money.
Check out The Ascent's mortgage calculator to estimate what your monthly payment might be including principal, interest, insurance, taxes, and PMI.
Mortgage rate forecast for the rest of 2020 and beyond
Although I certainly can't predict the future with perfect accuracy, there isn't any real reason to believe that mortgage rates will spike higher anytime soon. The Federal Reserve continues to hold benchmark interest rates at near-zero levels and has indicated its intention to continue to do so for the foreseeable future. Furthermore, unemployment in the United States remains elevated compared with pre-pandemic levels and inflation is quite low. This combination should keep the cost of borrowing low for at least the next few months.
Beyond the rest of 2020, however, it's tougher to predict. The two biggest factors that could cause mortgage rates to rise are the incoming Biden administration and the distribution of a COVID-19 vaccine. If the new administration successfully passes a large stimulus bill, for example, it could create upward pressure on mortgage rates. The same can be said if the economy (specifically the unemployment rate) improves dramatically as a COVID-19 vaccine becomes available in the coming months.
For now, it remains a historically cheap time to obtain a mortgage. So if you're looking to buy a home or refinance, or are just curious about how low of a mortgage rate you might be able to get, check out our updated list of the best mortgage lenders.
