Key mortgage rates reach a low

A pair of key interest rates continues to drop, motivating bankers to encourage homebuyers to sign contracts before the party stops.

“People have a great opportunity to capture a low rate in competitive housing market,” Umpqua Bank Home Lending manager Brandon Quigley said. “The way it translates to me is, people who have the opportunity to fix their housing expense should do that, sooner rather than later.”

Freddie Mac reports the 30-year fixed rate dropped for the seventh time in nine weeks, to 3.73 percent as of Friday from 3.84 percent a week ago.

The 15-year fixed rate also keeps trending downward: It dropped to 3.16 percent from 3.25 percent.

“I told some of my customers about a year ago, ‘I might work my entire career and never see 30-year rates in the threes,” Quigley said. “It’s amazing to me that we’re seeing rates this low. A year ago — or even nine months ago — I would not have predicted we’d be where we’re at right now.”

Factoring in a strong FICO credit score and a 10 percent down payment, a 30-year mortgage on a $250,000 property comes in at $1,175.59 a month. A 15-year mortgage on the same home means a payment of $1,756.67. The 5/1 Hybrid adjustable-rate mortgage — also trending down — is the lowest payment, at $1,088.02. The rate is locked for five years and then can adjust yearly thereafter.

With a strong FICO score and a 10 percent down payment, a 30-year payment on a $500,000 property runs $2,052.23, $3,102.62 on a fixed 15-year and $1,927.65 on a 5/1 adjustable-rate mortgage.

“Most consumers don’t like the idea of a variable rate loan,” Quigley said. “But when you think about it, that’s what your rent is. It can change as soon as the lease is up. So with rates this low, it really makes sense.”

This time last year, mortgage rates for 30-year and 15-year fixed-rate mortgages were 4.55 percent and 4.05 percent, respectively.

While the rates indicate good news for buyers, some brokers are holding their collective breath in fear of a potential market correction.

“From everything I’ve read and from what I’ve learned,” Quigley added, “I think we’re going to see a flattening. I don’t think we’re going to see a rapid change one way or the other, but I do think it’s going to flatten out. It has to. It can’t keep dropping forever.”

The rate on a 30-year mortgage is now at its lowest point since November 2016.

Refinancing with rates in the threes might work for some homeowners looking to lower a payment or cash out equity, Quigley added.

“It’s really a great time to look at refinancing,” he said. “For a myriad of reasons, really. People who own their homes right now have more equity than they’ve ever had. It’s a great time for them to take advantage of that.”