Rates on the average 15-year, fixed-rate mortgage hit a new low this week, falling to 2.66 percent, according to mortgage giant Freddie Mac
The 15-year is particularly popular with homeowners who want to refinance their old mortgages to a lower rate and pay off their loan more quickly.
Interest rates on 30-year loans, which are popular among first-time homebuyers, averaged 3.37 percent, a single tick above the record low of 3.36 percent set two weeks earlier.
Someone who bought a home five years ago with a 30-year, fixed rate loan of 6 percent, for example, would be paying $1,200 a month on a $200,000 mortgage. Refinancing the remaining balance of about $185,000 — plus $5,000 in fees — into a new 15-year loan at 2.66 percent would cost slightly more per month, $1,281 a month, but the loan would be paid off 10 years sooner.
Rates have inched down about 0.2 percentage points since the Federal Reserve announced plans in September to buy as much as $40 billion a month of mortgage-backed securities until the economic recovery started gaining momentum.
That may be happening already, according to Keith Gumbinger, of mortgage information company HSH.com.
“If the economy continues to show signs of improvement this fall, mortgage rates could firm a little more,” he said. “For that to occur though, we’ll need a lot more evidence that forward momentum is building.”
Frank Nothaft, Freddie Mac’s chief economist, said rates remained unchanged this week as “home construction builds up steam.”
He noted that construction on single-family homes continues to rise, as does homebuilder confidence, both of which point to an improving housing market.