Did home buyers miss the boat for bargain-rate loans?
Loop North News

The Home Front
Long-term mortgage rates are creeping higher because of rising interest rates on 10-year Treasury notes. 30-year fixed home loan rates could rise to 4% by the end of next year.

2-Nov-21 – The bargain-rate mortgage boat, carrying home loans with rates in the mid-2 percent range, has officially sailed.

On October 28, the benchmark 30-year fixed home loan average nationwide shot up to 3.14 percent from 3.09 percent a week earlier, reported Freddie Mac’s Primary Mortgage Market Survey. A year ago, 30-year fixed loans averaged 2.81 percent.

Freddie Mac

Meanwhile, the rate on 15-year fixed mortgages rose to an average of 2.37 percent from 2.33 percent a week earlier. A year ago, lenders were quoting a rate of 2.32 percent on 15-year fixed loans.

On July 22 – only three-and-a-half months ago – would-be home buyers and families seeking to refinance had a chance to lock in a 30-year fixed mortgage at 2.78 percent. 15-year fixed mortgages hit a record low average of 2.1 percent nationwide on July 29.

Thirty-year fixed mortgage interest rates ended 2020 at a rock-bottom 2.66 percent, the lowest level in the Freddie Mac survey history, which began in 1971. Home loan rates set new record lows an amazing 16 times in 2020, and tens of thousands of homeowners refinanced.

Sam Khater

“The yield on the 10-year Treasury note has been trending upward due to the decline in new COVID cases, increasing consumer optimism, as well as broadening inflation and persistent shortages,” said Sam Khater (left), Freddie Mac’s chief economist.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a 20 percent down payment and have excellent credit.

Analysts said long-term mortgage rates are creeping higher because of rising interest rates on 10-year Treasury notes, which hit 1.64 percent in mid-October. The 10-year Treasury note rate was only 1.26 percent on July 29.

By early November, the Federal Reserve is expected to announce a timetable for reducing its monthly bond purchases, which have kept mortgage rates at ultra-low levels for much of the past 18 months.

A recent forecast by the Mortgage Bankers Association projects 30-year fixed home loan rates to rise to 4 percent by the end of 2022. The National Association of Realtors also sees rates moving higher, reaching 3.5 percent by mid-2022.

“Mortgage rates are rising, but purchase demand remains firm, showing that latent purchase demand exists among consumers,” noted Khater.

Adobe Stock

Chicago-area borrowers who move quickly still have a chance to lock in the following bargain rates as of October 28, reports RateSeeker.

Gateway Capital Mortgage in Chicago was quoting 2.76 percent on 30-year loans and 2.125 percent on 15-year mortgages with a 3 percent down payment and a $595 loan fee.

First Savings Bank of Hegewisch was quoting 2.684 percent on a 30-year loan and 2.1 percent on a 15-year loan with 20 percent down payment and a $570 loan fee.

Rate Rabbit was quoting 2.79 percent on a 30-year loan and 1.875 percent on a 15-year mortgage with 20 percent down. However, the loan fee is $1,900.

Mortgage rate history

Archives of the now-defunct Federal Housing Finance Board show long-term mortgage rates in the 1960s were not much higher than the Great Depression, when lenders were charging 5 percent on five-year balloon loans.

Nearly six decades ago, between 1963 and 1965, you could get a mortgage at 5.81 to 5.94 percent. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6 to 9 percent range.

In the early 1980s, runaway inflation caused home loan rates to skyrocket over the moon. According to Freddie Mac, benchmark 30-year mortgage rates peaked at a jaw-dropping 18.45 percent in October 1981 during that Great Recession.

Rates finally fell below 10 percent in April 1986, then bounced in the 9 to 10 percent range during the balance of the 1980s. Twenty-two years ago, in August 1999, when some of today’s Millennial borrowers were in diapers, lenders were quoting 8.15 percent on a 30-year fixed mortgage. Back then, that seemed like a good deal.

By Don DeBat | Loop North News | debatnet@aol.com

FREE WEEKLY EMAIL UPDATE

What’s news in the Loop and Near North
neighborhoods of downtown Chicago.

Signup for our weekly email. No ads, no email tracking, and no charge.

Number of subscribers:

See this week’s update