Mortgage rates hit a modern-day record low, yet again.
The benchmark 30-year fixed-rate mortgage fell 3 basis points this week, to 4.71 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.44 discount and origination points. One year ago, the mortgage index was 5.56 percent; four weeks ago, it was 4.75 percent.
Bankrate has been collecting mortgage rate data for nearly 25 years, and this is the lowest it has ever been. The previous record of 4.74 percent was set July 7 and again July 21. The 30-year fixed has hit record lows seven times since May. According to the National Bureau of Economic Research, the last time rates were this low was April 1956, when rates on FHA-insured loans averaged 4.71 percent.
The benchmark 15-year fixed-rate mortgage fell 1 basis point, to a record-low 4.17 percent. The benchmark 5/1 adjustable-rate mortgage rose 1 basis point, to 4.07 percent. The benchmark jumbo 30-year fixed remained unchanged, at its record low of 5.43 percent.
Weekly national mortgage survey
Results of Bankrate.com's July 28, 2010 weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
'Cash-in' refi boomThe refinancing boomlet continues, with 78 percent of mortgage applications coming from homeowners who want to refi, according to the Mortgage Bankers Association. Increasingly, borrowers pursue "cash-in" refis, meaning they pay additional money at the closing table so the new loan balance is less than the old loan balance.
Freddie Mac says 22 percent of refinancers got cash-in refis in the second quarter of this year. That's up from the first quarter, when 19 percent of refis were cash-in.
Freddie's chief economist, Frank Nothaft, says: "Interest rates on fixed-rate mortgages are at 50-year lows, making refinancing attractive if borrowers qualify. And similarly, rates on savings instruments like CDs are also very low, which makes the choice of paying down mortgage principal very attractive to borrowers with extra cash reserves."
Anthony Hsieh, CEO of loanDepot.com, an online lender based in Irvine, Calif., sees the cash-in phenomenon daily. Customers often combine a cash-in refi with a reduction in the loan's term -- for instance, going from a 30-year loan to a 20- or 15-year mortgage.
"They're thinking about shortening up the term and at the same time bringing some cash in to reduce principal," Hsieh says. "We're seeing all of that today, where we have not seen (it) previously."
Reducing the term to 20 years results in less payment shock than reducing the term to 15 years. By combining a shortened term with a cash-in refi, borrowers escape having to pay mortgage insurance. They also come up with a comfortable monthly payment, he says.
Lock in nowBrian Koss, executive vice president of Mortgage Network in Danvers, Mass., says he cautions customers to lock at these low rates, whether they're refinancing or buying a home.
"If you're looking at your lowest rates in a lifetime, why would you think you can beat this?" he says.
Koss notes the biggest banks have a disproportionate share of the mortgage market, a condition that reduces competition. The three biggest mortgage lenders -- Wells Fargo, Bank of America and Chase -- held a 56 percent market share in the first quarter of this year.
"What's their incentive to go lower (in rate)?" Koss asks. That's why he counsels locking instead of floating.