Happy Valentine's Day: Mortgage Rates Are At Their Lowest In Three Years!

Mortgage rates across the U.S. have fallen to a three-year low, a boon for house hunters and homeowners looking to refinance. 

The average 30-year mortgage charges 3.45%, while 15-year loans are 2.97%, according to Freddie Mac. That's down from 4.41% and 3.84% a year ago. Lower rates mean homeowners pay less for their house over the life of the loan. So anyone with decent credit shopping for a home is likely getting the cheapest interest rates in years, experts said. 

"The bottom line is that mortgage rates are plummeting to lows last seen in 2016, and for many homeowners, it's a profitable time to refinance," said Holden Lewis of personal finance site NerdWallet. "Even if rates rise slightly, they're still low by historical standards."

Several factors are pushing down mortgage costs. The Federal Reserve has kept rates low after cutting them three times last year amid signs of economic weakness, while inflation remains tame.

"And once [banks] start to expect that, they're willing to lend money over the long run at lower interest rates," said Bob DeYoung, an economist and business professor at the University of Kansas. 

Another reason mortgage rates have receded: European and other overseas investors seeking shelter from Brexit, the coronavirus, and other global risks have scooped up U.S. Treasuries, pushing down yields. Banks typically keep mortgage rates slightly above Treasury rates, so home loan costs have declined. 

Lewis noted that mortgage rates began falling in January, around the same time as the first officially reported coronavirus case. Mortgage rates fell "because of concerns that the new virus could potentially cause a pandemic that could disrupt global trade and slow the U.S. economy," he said of the move by investors into safe havens like U.S. government bonds. 

"If officials succeed in containing the virus and damping fears of its economic effects in February, then mortgage rates could stabilize or even rise," Lewis said. 

Until then, homebuyers are taking advantage of lower rates. According to the Mortgage Bankers Association, mortgage applications rose 5% between the end of January and the first week of February. The association said all told applications are 11% higher than last year. The Federal Reserve Bank of New York noted mortgage originations have jumped to their highest number since 2005. 

"I wish when I was 25 years old, and I was buying a home, that I had rates like this year," DeYoung said. "This is such a benefit for people looking right now to buy a home."