Summer’s almost officially over, but here come the fireworks for mortgage rates. They’ve skyrocketed, taking their biggest week-to-week jump in nearly a year.
But borrowers don’t need to take cover because rates are still pretty darn low, both historically speaking and compared to where they were in September 2018.
Don’t let a good rate get away if you’re buying a home or are wanting to refinance.
This week’s numbers
On 30-year fixed-rate mortgages, the current average rate is 3.73% — up 17 basis points from last week’s 3.56%, says mortgage giant Freddie Mac. A basis point is one hundredth of 1%.
The increase is the largest since October of last year.
The loans in the survey come with an average 0.5 point.
Even with this week’s surge, the benchmark mortgage rate remains almost a full percentage point below where it was a year ago, when the average was 4.65%.
If you took out a home loan in 2018, you might have an opportunity to refinance — and save a ton of money. You’ll want to take a look at this week’s best mortgage rates where you are.
Americans who refinanced this past spring are now saving an average of about $140 a month, or $1,700 per year, Freddie Mac recently said.
Many homeowners are getting the refi bug: Refinance activity is up 148% from a year ago, according to the Mortgage Bankers Association. But mortgage applications overall were flat last week, down a scant 0.1%.
Why rates are doing what they’re doing
Tantalizingly low mortgage rates are a big reason for this week’s spike in rates.
Homebuyers have been rushing to take advantage of the recent drops in rates, and the increasing demand for loans has helped to push mortgage rates higher.
“While there was initially a slow response to the overall lower mortgage rate environment this year, it is clear that the housing market is finally improving due to the strong labor market and low mortgage rates,” says Sam Khater, chief economist at Freddie Mac.
The market for homes is likely to stay healthy, because mortgage rates aren’t expected to keep soaring. Freddie Mac’s current forecast looks for 30-year mortgages to average around 3.6% through the first half of 2020.
Low interest rates from the Federal Reserve should help. The Fed just cut rates for the second time this year and hinted that one more reduction is coming in 2019.
This week’s other mortgage rates
Other mortgage rate options also have jumped this week.
Rates on 15-year mortgages have popped up to an average 3.21%, from 3.09% last week.
Those shorter-term home loans are a popular choice among homeowners who finance. Last year at this time, 15-year fixed-rate mortgages were averaging 4.11%, Freddie Mac says.
And, rates have shot up on 5/1 adjustable-rate mortgages, or ARMs, which are level for five years and then can “adjust” up — or down — every year.
ARMs are currently being offered at an average initial rate of 3.49%, up from 3.36% last week. One year ago, the starter rates were at an average 3.92%.
When you apply for a mortgage, you’ll need down payment money. Find a savings account at a great rate, and start setting that cash aside.