Mortgage and refinance rates today, Oct. 8 — here's how it affects you

Mortgage rates have declined to record lows several times since the coronavirus pandemic hit the U.S. earlier this year. In fact, current mortgage rates are still under 3% — so if you're looking to take out a home mortgage or refinance loan, now is the time to snag that current rate.

After falling initially in March, new home sales have rebounded and are climbing to record highs. In August 2020, home sales were up 43% over August 2019, according to data from the U.S. Census. The rate of home sales in August hit the highest sales rate seen since December 2006.

Whether you're a first-time homebuyer or you're considering refinancing your mortgage, mortgage rates affect your personal finances. An online marketplace like Credible can show you current mortgage and refinance rates and determine what you qualify for.

As you weigh your options, here's how the current rate affects you (and real estate in general).

What are today’s mortgage rates?

Mortgage and refinance rates are still low — and they're predicted to remain that way. In 2020 alone, mortgage rates have hit record lows nine times. Here's what you need to know.

Current mortgage rates, as of October 8, 2020:

• 30-year fixed-rate mortgage: 2.87%
• 15-year fixed-rate mortgage: 2.37% 

Current rates are substantially lower than the ones seen pre-pandemic. At the beginning of March 2020, a 30-year fixed-rate mortgage could be obtained for an average of 3.65%, only slightly lower than the previous year (March 2019) rate of 3.73%.

To take advantage of these lower rates, turn to Credible. You can compare mortgage lenders to get a competitive rate without impacting your credit score by filling out your information here.

Rate forecast

Mortgage rates are subject to change slightly week-to-week and mortgage lenders offer different interest rates — so predicting how current mortgage and refinance rates will change in the future is difficult. But the good news is the Federal Reserve is committed to stabilizing the economy. Current Fed projections keep interest rates near the current level until 2023.

That's particularly good news if you're looking to refinance your mortgage and lock in a lower rate. A mortgage refinance can lower monthly payments and cut the life of your home loan. Crunch the numbers through this free online tool and compare rates in order to hit your financial goals.

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How do interest rates impact mortgages?

Low mortgage rates significantly impact home loan volume, because home buyers want to take advantage of low rates.

If you're hoping to secure a lower interest rate on your home loan, then you should start shopping online. With Credible, you can shop by loan type and compare rates almost instantly.

Research from Black Knight finds from April to June lenders issued $1.1 trillion in new loans (both refinances and new mortgages.) This is the biggest quarter of loan volume seen since 2000.

With banks underwriting more loans and navigating concerns of existing customers in mortgage forbearance, the length of time it takes to close on a mortgage loan increases. According to the Ellie Mae Origination Insight Report, the time to close on a mortgage increased by a full seven days from August 2019 to August 2020.

Even though rates are low, economic instability due to the pandemic means banks are tightening lending criteria. A July 2020 survey of mortgage lenders from the Federal Reserve found that “over the second quarter [2020], major net shares of banks tightened standards for all residential real estate [RRE] loan categories except for subprime residential mortgage loans.”

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How do mortgage rates affect homebuyers?

The lower the rate, the more money a buyer saves over the life of the loan. For example, a $300,000 mortgage at 2.9% saves a buyer $50,000 over the life of the loan compared to a loan at 3.9%.

Low mortgage rates also mean a buyer can qualify for a larger loan with the bank. Find out what kind of mortgage rates you qualify for and your estimated monthly payments without impacting your credit score.

To see how interest rates can impact your bottom line, use an online loan calculator.

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How do mortgage rates affect sellers?

Lower rates do not affect sellers as much as they do home buyers, but there are tangential benefits. Sub-3% rates may encourage more people to buy, even during a pandemic, which helps the housing market stay active enough for sellers to offload their property.

For homeowners looking to “stay put,” lower rates also signal a time to investigate refinancing options, as this may be when to snag substantial savings. Particularly if you bought in 2018 when rates hovered close to 5%, or have an adjustable-rate mortgage, refinancing can be a great option for reducing interest on your mortgage loan and locking in a rock-bottom rate.

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How to get a mortgage

The first step to taking out a mortgage is to get prequalified through a lender. Not all lenders offer the same rate or mortgage terms, which is why it is important to “shop” rates by inquiring with multiple mortgage lenders.

Fortunately, this isn’t as time-consuming as it was even five years ago. You can shop rates with a variety of mortgage lenders in a matter of minutes — just answer a few quick questions.

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How today's rates have changed the mortgage process

Here are a few of the changes you’ll see in the mortgage process due to low rates:

• Stricter lending criteria.
• With increased loan volume, many lenders may keep rates higher than average in order to discourage new business. This could mean consumers have fewer choices when it comes to rate shopping with multiple lenders.
• Increased loan volume also means it can take longer to close on a loan.
• Shorter rate lock periods on preapprovals.
• Increased verification of employment and financial records, especially if there is a substantial amount of time between preapproval and underwriting.

Also keep in mind that amid the coronavirus pandemic, the mortgage industry is the same as everyone else: they’re learning how to conduct business remotely. From appraisals to notarizations, to conducting title searches, many facets of the mortgage lending business take place face-to-face. Mortgage lenders will figure out a workaround, but this can also increase the time to close on the loan in addition to delays due to current loan volume.

While the cause of low rates may be bad news for the country and the economy, low-interest rates almost always benefit the consumer (and lead to saving money); the lower the interest rate, the less it “costs” to borrow money.

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