15-year mortgage rate hits record low
By Les Christie
NEW YORK (CNNMoney) — Mortgage rates dropped again this week, with the 15-year fixed-rate loan hitting a record low, according to a report from mortgage financier Freddie Mac.
The 15-year fixed rate fell to 2.57% from 2.61%. A year ago, it stood at 3.07.
The most popular mortgage, the 30-year fixed rate, came in at 3.35%, a drop of 0.05 percentage point and only 0.04 percentage point above its record low set the week of November 21, 2012.
The rates provide a welcome boost to the housing market and to the overall economy, according to Frank Nothaft, Freddie Mac’s chief economist.
“Residential fixed investment added to overall economic growth over the past eight consecutive quarters and contributed more than 0.3 percentage points in growth over the first three months of this year,” he said. “[N]ear record low mortgage rates should further drive the housing market recovery over the near term.”
Existing homeowners are some of the biggest beneficiaries of the falling interest rates. The 15-year, fixed loans are popular with borrowers seeking to shorten their loan terms — saving themselves on total interest payments. The record low rates enable them to do that without increasing their monthly payments very much.
Borrowers with three-year-old, 30-year fixed-rate loans at 5% would have a monthly payment of about $537 for every $100,000 borrowed, and would pay out a total of about $93,000 in interest over the course of the mortgage. Switching to a 15-year at 2.57% would increase the payment only to $670 a month but the total interest paid out would come to less than $21,000.
Mortgage refinance applications rose 1.8% last week, according to the Mortgage Bankers Association, and account for about 75% of all applications for mortgages.