E Economics

15-Year Mortgage Rate Fell To A Record Low, Boosting Prices And Refinancing

23 July, 2021
15-year mortgage rate

The 15-Year mortgage rate retraced sharply this week and reached a new record low. The move kept boosting housing prices, which already rose most in decades. In the meantime, low mortgage rates are likely to amplify a new wave of mortgage refinancing that is expected to start from August 1.

15-Year Mortgage Fell Back To A New Low

According to Freddie Mac, the 15-year fixed-rate mortgage (FRM) averaged 2.12 percent for the week ending July 22, 2021 (the lowest on record). It was down from the previous week when it averaged 2.22 percent. A year ago at this time, the 15-year FRM averaged 2.54 percent.

Over the same period, Freddie Mac report also showed the 30-year fixed-rate mortgage declined significantly. It averaged 2.78 percent, down from 2.88 percent last week. A year ago at this time, the 30-year FRM averaged 3.01 percent.

Low Mortgage Rates Will Support Housing Prices And Refinancing

Associated with a shortage of inventory, low mortgage rates are boosting home prices. The S&P CoreLogic Case-Shiller index of national property values climbed 14.59% YoY in April, the biggest gain in data going back to 1988.

The trend is likely to strenghten in May. The acceleration would be coherent with data from Corelogic and Black Knight. It should also continue in June as suggested by recent Zillow figures.

In the meantime, low mortgage rates are likely to amplify a new wave of mortgage refinancing that is expected to start from August 1. The WSJ highlighted “The cost of refinancing government-backed home loans is expected to fall as mortgage giants Fannie Mae and Freddie Mac are set to drop a fee imposed last year in the midst of the Covid-19 pandemic.

Fannie and Freddie will eliminate the 0.5% fee on mortgage refinancing starting August 1. According to the Mortgage Bankers Association, the fee added about $1,400 to the cost of refinancing an average mortgage backed by the firms.