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Mortgage rate trends have been predictable in October in recent presidential election years: Rates stood still as the mortgage industry held its breath, awaiting the result of the balloting. That has been the pattern in the run-ups to the last two elections.
This month began with a distressing October surprise — the news of the president's COVID-19 diagnosis. Stock prices fell in the immediate aftermath, while bond yields fell and then rose, leaving mortgage rates largely unaffected. 2016 had October surprises, too, but they appeared to have no effect on mortgage rates.
In elections before 2012, the pattern is less defined. October 2008 is an outlier because it was a tumultuous month in that year's economic crisis, and that volatility was reflected in fast-changing rates. In October 2004, the 30-year fixed established no pattern beyond zigzagging, with a high of 5.82% and a low of 5.64% that month.
In 2000, the rate barely moved in the first three weeks of October, then dipped in the last week of the month before plunging during the Florida ballot-recount turmoil that was ended by the Bush v. Gore decision. Specifically, in Freddie Mac's survey the 30-year fixed averaged 7.68% the week ending Oct. 27, 2000, and ended the year at 7.13%.
Back to this year: fell in September, with the 30-year fixed-rate mortgage averaging 2.98% APR in NerdWallet's daily survey. The rate was down more than one percentage point from September 2019, when it averaged 4.04%. September was the fourth month in a row in which the average rate on the 30-year fixed-rate mortgage fell to a record low.
With rates so low, a lot of people are refinancing their mortgages. In the last full week of September, 63.3% of mortgage applications were from homeowners who wanted to refinance, according to the Mortgage Bankers Association. But refinances are slowly waning; the previous week, they made up 64.3% of mortgage applications.
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There are still plenty of people who could benefit from refinancing. As of late summer, about 18 million homeowners were qualified to refinance their mortgages, according to Black Knight, a mortgage industry data analytics provider. These are homeowners who have good credit and at least 20% equity and who could shave at least 0.75% off their mortgage rate by refinancing.
Why are fewer people refinancing? First, a lot of motivated homeowners refinanced in spring and summer, so they already got the task out of the way. Second, interest rates for refinances haven't fallen as much as rates for purchases. As the demand for refinances drops over time, lenders might cut refi interest rates to attract more customers.
Another factor could make borrowers think twice about refinancing: the 0.5% "" that Fannie Mae and Freddie Mac will begin charging on certain loans they buy, beginning Dec. 1.
Even though the fee goes into effect on loans that Fannie and Freddie buy Dec. 1 and later, borrowers will begin paying it before then. The reason is that mortgages usually are sold to Fannie and Freddie a few weeks after closing. A loan that closed in October might not be sold to Fannie or Freddie until December. Some lenders began charging the fee to borrowers who locked their rates in September.