The average rate on a 15-year fixed rate mortgage fell to a record low this week, averaging 2.45 percent in Bankrate’s weekly survey.
Such low rates have put 15-year fixed mortgages in reach for more borrowers than ever, which can mean a substantial long-term savings.
Because 15-year loans have shorter repayment period than the more common 30-year mortgage, borrowers pay less interest overall, on top of the fact that 15-year mortgages tend to have lower interest rates to begin with.
However, the shorter repayment period means higher monthly payments over the life of the loan, which had been prohibitive for many buyers when interest rates were higher.
At today’s rates, borrowers would save about $100,000 in interest with a 15-year mortgage compared to a 30-year one.
Last week’s lower rates were in defiance of most market watchers’ predictions. Of all the experts polled in Bankrate’s weekly rate trend index, only one said he was anticipating a drop.
“People in the mortgage business are like the undertaker in those Clint Eastwood westerns. We thrive on bad news,” said Dick Lepre, a senior loan officer at RPM Mortgage, Inc. in Alamo, California. “Conversely on Nov. 9, Pfizer announced a potential COVID vaccine, equities boomed and fixed income sold off displacing rates higher. Volatility will remain high and COVID perceptions will continue to move markets.”
Despite the drop this week, mortgage interest rates are likely to continue rising in the near term for most products, but even as they climb upward, they’ll still be very low compared to historical rate trends.