April mortgage rates make it easier to buy or refi

White house on top of money

Home loans are cheaper than they ever were in 2014.

In fact, we haven't seen rates like this since the last time they were at, or near, record lows in May 2013.

That's surprising because the Federal Reserve ended a two-year campaign to drive down long-term interest rates last fall — a move that was widely expected to push mortgage rates higher.

But falling demand for home loans trumped that policy change and held rates down.

The average cost of 30-year jumbo mortgages has plunged to new lows this month, breaking the previous record set two years ago.

The typical non-jumbo, 30-year fixed-rate home loan — the most popular way to finance a home — costs between a half and three-quarters of a point less than this time last year.

That decline saves borrowers $30 a month for every $100,000 they borrow, and we're just looking at the average cost of financing a home.

Savvy borrowers with decent credit can almost always pay a quarter to half point less than that.

Spend a few minutes searching our extensive data base for the best current mortgage rates from dozens of lenders in your area. You'll see what we mean.

National Average Mortgage Rates

Type of loan Current average Record-low average Established
30-year fixed rate 3.92% 3.50% Dec. 5, 2012
15-year fixed rate 3.04% 2.75% May 1, 2013
30-year fixed jumbo 3.92% 3.92% April 8, 2015
5/1 ARM 3.06% 2.63% May 1, 2013

Jumbo loans are mortgages that are too large to be purchased by Fannie Mae and Freddie Mac, the two government-owned companies that buy or guarantee most of the mortgages issued by banks and other lenders.

The largest loans they can buy depend on where the home is located but range from $417,000 in most places to $625,000 in the nation’s most expensive cities. If you need to borrow more than that, then you’ll need a jumbo loan.

Devoting a little time to finding the best possible mortgage can save tens of thousands of dollars in interest over the life of the loan.

That's especially true since we're borrowing more than ever before.

The average loan used to buy a home has reached a record high of $294,900 this year, according to the Mortgage Bankers Association. The typical mortgage is now $50,000 larger than during the final months of 2007, just before the financial crisis and recession.

Yet a recent report from the Consumer Financial Protection Bureau says nearly half of Americans seriously consider only one lender or broker before applying for a mortgage. And about 75% fill out an application with only one lender.

Why are so many of us failing to comparison shop?

"It is a surprising finding, and it suggests that they're still fairly intimidated by the mortgage transaction," Richard Cordray, head of the government bureau, told NPR. "Or they're a little distracted because, at the same time, they're picking out a house."

Possibly. But rates are so low this spring that some modest shopping around can land home buyers a once-in-a-lifetime mortgage.

It wasn't supposed to be like this after the Federal Reserve stopped flooding the mortgage market with money last year.

Back in the fall of 2012, the nation's bank-for-banks began buying $85 billion worth of debt a month, a fairly even split between Treasury bills and bonds backed by thousands of home loans.

That pushed mortgage rates to record lows in an attempt to boost real estate sales and property values.

With the housing market improving, the Fed gradually reduced those bond purchases last year and ended them altogether in November.

Experts expected mortgage rates to rise by anywhere from a half point to as much as a full point.

But the demand for home loans fell precipitously in 2014.

Refinancings were off by 60%, and new loans to buy properties fell 15%. All in all, Americans took on less new mortgage debt than in any year since 1997.

The Fed's exit from the market just hasn't mattered. There's still plenty of money to fund all of the mortgages being written, and that's been reflected in lower interest rates — at least so far.

Although the Mortgage Bankers Association expects demand won't recover much over the next couple of years, it now projects the average cost of a 30-year, fixed-rate loan will steadily rise to 4.6% by the end of the year and 5.4% by the end of 2016 — down from 4.8% and 5.6% in earlier estimates.


The 7 biggest mortgage mistakes

A mortgage is the biggest debt most of us will ever carry. That's why it's so important to avoid pitfalls like letting the bank decide how much house you can afford or failing to check your credit before you try to buy. These mistakes can cause you to pay more than you need to, prevent your loan from closing or even lead to foreclosure.

For now, however, home loans are not only cheaper, they're also easier to get.

Home buyers with conventional loans had an average FICO credit score of 755 last year, according to Ellie Mae Inc., a California-based mortgage technology firm whose software is used by many lenders.

That's down from an average of 759 in 2013 and 763 in 2012.

The average FICO score for homeowners who refinanced through a conventional loan was 733, down from 747 in 2013.

FHA loans clearly helped borrowers with too much debt and lower credit scores.

The average FICO score for home buyers has fallen from 700 in 2012 to 695 in 2013 and just 681 last year.

It's also taking less time for loan applications to be processed and approved — an average of just 40 days, down from 46 days last year and 48 days in 2012.

Those are exactly the kinds of trends that help borrowers land the loans they need.