US MORTGAGE RATES IN THE FIRST QUARTER 

 US MORTGAGE RATES IN THE FIRST QUARTER 

US mortgage rates in the first quarter are virtually at a standstill. The average rate for a 30-year fixed-rate mortgage increased only slightly, to 3.18% at the beginning of April. Average rates for 15-year fixed-rate mortgages and the famous 5/1 ARM (fixed for 5 years, then variable), however, remained unchanged.

Since February 2021, mortgage rates in the U.S. have risen, reducing the number of homeowners able to save money by refinancing to unprecedented levels over a 12-month period. More than 11 million homeowners are able to reduce their interest rate by 0.75%, saving approximately $277.

In New York City, the number of mortgage refinancing applicants is highest (713,000 applications), followed by the Los Angeles metropolitan area (418,000 applications) and the Chicago metropolitan area (413,000 applications).

Mortgage applications down before spring 2021

In the current US real estate market, hungry for buyers and lacking in housing supply, the observation that demand for mortgages is declining seems entirely logical. With few properties to buy, obtaining a mortgage is a less frequent topic. At least, this is what can be deduced from the downward trend in mortgage applications in the United States.

In 2021, and for the fourth consecutive year, mortgage applications are falling. For example, during the last week of March 2021, the number of applications had decreased by 2.2%. This decline is attributable to lower inventory levels, but also to rapid growth in housing prices in the United States.

Falling mortgage rates and dwindling inventory, despite rising prices, are resulting in record-breaking times for properties to stay on the market. For example, a home in Denver can sell in just 15 days after being listed on Realtor.com . This is a significant decrease compared to the average time properties stayed on the market in 2019—30 days.

Growing demand is also driving up prices. It's not uncommon to see real estate prices climb by nearly 40% in a year, as is the case in Austin, for example. Also contributing is the influx of New York City residents, who are increasingly seeking a lifestyle outside the metropolitan area.

Additionally, across the country, some areas have half the inventory of properties for sale compared to the same period in 2020. In some markets, this figure is even less than a third. In practical terms, a buyer who had a choice of around ten properties within their price range in 2020 now has only five, or even three, to choose from.

Changes in mortgage rates in the USA

Fixed rate over 30 years

The average rate for the benchmark 30-year fixed-rate mortgage increased by one basis point to 3.18% at the end of the first quarter of 2021 (source: Freddie Mac). This compares to 3.33% for the same period in 2020.

Fixed rate over 15 years

The average interest rate for 15-year fixed-rate mortgages was 2.45% at the end of the first quarter of 2021, compared to 2.82% in the first quarter of 2020.

The ARM 5/1

ARMs are mortgages whose interest rates fluctuate with the market. A 5/1 ARM means the rates remain fixed for 5 years, then switch to a variable rate. This means that as the average rate increases or decreases, so do the repayments.

The average rate for a 5/1 adjustable-rate mortgage was 2.84% at the end of the first quarter of 2021, compared to 3.4% at the same time last year. It's worth noting that ARMs have historically offered lower interest rates than fixed-rate mortgages in the U.S., making them an attractive option for borrowers planning to sell their properties before the end of the five-year fixed-rate term.

US mortgage rates: how to interpret their current low level?

For borrowers, mortgage rates in the U.S. are at their lowest ever. This means it's an ideal time for those looking to save money on a new home loan, as well as for those looking to refinance their existing loan.

The prerequisite for qualifying for attractive US mortgage rates is a credit score of at least 760. In fact, lending institutions reserve their lowest rates for those with a good credit profile. This score is an important indicator of borrower risk; it takes into account late payments and defaults. In fact, borrowers with a poor credit score may be charged an additional point higher than borrowers with a very good or excellent score.

As you can see, before applying for a mortgage, you need to check your credit score. Many banks allow you to do this for free. It's also possible to improve your credit score by paying off your debts quickly. You can also apply for a loan after paying your monthly bills on time, such as your internet and other utility bills.

In addition to your credit score, lenders will analyze your debt-to-income ratio (DTI). This figure is your total monthly debt divided by your gross monthly income. It gives lenders insight into how much you owe compared to how much you earn. The lower your DTI, the more likely you are to qualify for a lower interest rate. It's important to note that most mortgage lenders require a minimum DTI of 43% before considering lending or refinancing a borrower's mortgage.

As with any transaction, it's advisable to shop around to get the lowest possible mortgage rate in the US. Compare offers at the current average interest rate, taking into account your credit score, as well as your debts and expenses, before applying. If lenders offer a higher rate than expected, ask them to justify their offer so you can identify areas for improvement to obtain lower rates.