Mortgage rates are continuing to fall amid economic uncertainties and a sagging stock market, with the 30-year home loan available this week at an average 4.32% — the lowest fixed rate of the year, according to mortgage company Freddie Mac.
The typical rate for a 15-year fixed mortgage was 3.5%, Freddie Mac said Thursday — the lowest since Freddie began tracking it in 1991.
Despite 30-year rates averaging about 4.5% and the cheapest housing prices in eight years, home lending has slipped this year to the lowest level since 1997.
But with rates near record lows, the Mortgage Bankers Assn. says loan applications have spiked more than 20% because of the latest surge in refinancings.
The increase occurred despite a slight decrease in applications to buy homes. Refinance applications were up by 30%, the trade group said Wednesday.
Greg McBride, senior analyst for rate tracker Bankrate.com, said people with large mortgages in expensive markets like California should feel a particular sense of urgency if they are considering refinancing.
As a result of the credit crisis, the limit for a conforming loan — one that can be backed by Freddie Mac and or Fannie Mae — was increased to $729,750 in the most expensive regions to support the housing market. That increase is set to expire Oct. 1, when the conforming loan limit will fall back to $625,500.
Loans higher than the conforming limit, known as jumbos, are available — but rates have been running at least half a percentage point more than for conforming loans. And as McBride pointed out, people refinancing into a jumbo loan are required to have more equity in their homes, typically 25% or 30% instead of the 20% requirement on smaller mortgages.
For someone refinancing a $700,000 loan, “It means you’ve got to get the loan closed by the end of September before the goal posts move,” McBride said.
Freddie Mac surveys lenders early each week, asking them what conforming loan rates they are offering to borrowers with good credit and 20% down payments or, in the case of refinancings, at least 20% equity in their homes.
The borrowers in the latest survey would have paid 0.7% of the loan amount in upfront lender fees and discount points, along with additional payments for appraisals, title insurance and other third-party costs, Freddie Mac said.