By Dhara Singh
From Yahoo Money
Mortgage rates dropped to a new low for the 13th time this year, allowing a record number of homeowners to refinance, according to Freddie Mac, a government-sponsored agency that backs millions of mortgages.
The rate on the 30-year fixed mortgage fell to 2.72%, exceeding the previous low of 2.78% recorded the week of November 5. This is the lowest on records dating back to 1971 when the agency first began tracking rates. A year ago, the rate stood at 3.66%.
The new low would allow 19.4 million Americans to refinance their mortgages, a record high, according to exclusive data provided to Yahoo Money by Black Knight, a mortgage data and analytics firm. These homeowners could save a total of $5.98 billion on aggregate monthly payments.
â€œInvestors had to weight the promising news of another vaccine contender against this weekâ€™s disappointing retail report and still-rising COVID cases, which drove the Freddie Mac interest rate for a 30-year loan down 12 basis points to another record low,â€ said Georgie Raitu, senior economist at Realtor.com, a real estate listing website.
â€˜Buyers and owners may see different ratesâ€™
Not everyone will be able to tap into the record low rates.
â€œLow mortgage rates are good for homebuyers as well as those looking to refinance,â€ said Danielle Hale, chief economist at Realtor.com. â€œBut buyers and owners may see different rates offered depending on their credit characteristics, the type of home they are looking to buy or refinance, and whether they are doing a purchase or refinance itself.â€
As unemployment increased during the pandemic, home loans backed by the Federal Housing Administration and often used by borrowers with blemished credit have increased their minimum credit score requirements â€” up to the mid-600s at some lenders â€” to protect from a higher risk of default.
Many banks also tightened lending standards in the third quarter for most types of mortgages, including for government- sponsored mortgages, which make up the majority of bank mortgage originations, according to a recent report from the Federal Reserve.
Rates Could Dip Lower.
Rates will likely decrease in upcoming weeks, experts said, but the rate is unlikely to reach as low as 2.5%. That is largely due to lenders being unable to keep up with a mortgage refinancing boom during the pandemic.
â€œMortgage rates have traditionally been aligned with and mirrored the moves of the 10-year Treasury note,â€ Raitu said. â€œWith Treasury yields having spent the better part of 2020 under 1%, we could have expected rates to have been in the 2.5% to 2.6% [range], but many lenders have responded to high unemployment and a large wave of refinances by tightening underwriting standards and keeping rates higher.â€