Mortgage Rates Fall to Lowest Level Since February
Mortgage Rates Now Below 3%
Mortgage rates fell below 3% yesterday, reaching their lowest level since mid-February. The average rate on a 30-year fixed loan hit 2.97% compared to 3.04% last week, according to Freddie Mac.
The decline in mortgage rates caused home purchases and refinances to climb as consumers looked to take advantage of cheaper borrowing options. Some analysts expect interest rates to continue dropping or to stay steady at current low levels.
With the economy still suffering from the COVID-19 pandemic, the Federal Reserve has signaled it won’t take any action on interest rates for the foreseeable future.
Refinances Pick Up
Prior to the dip in mortgage rates, the number of refinances had been declining for several weeks, with financing applications down 20% at the beginning or April. Refinancing activity jumped 10% this week and are now up 23% year-over-year—represented 60% of all home loans this week.
Homebuyers also capitalized on the lower mortgage rates with applications for new home purchases increasing 6% this week. Conventional mortgages drove the demand. Loan sizes also increased this week, with home prices up 10.4% year-over-year and 22% in certain states since the onset of the pandemic.
Impact on Homeowners and Buyers
Lower mortgage rates most directly impact current homeowners, making it cheaper to refinance existing home loans. They are also a boost to prospective homebuyers, who benefit from a potentially lower monthly mortgage payment, but the effect may be limited for people competing in a red-hot real estate market.
Low mortgage rates, an exodus out of cities, and limited inventory are sparking price wars in certain parts of the country. That is shutting some potential homebuyers out of certain real estate markets.
Despite improvements in the economy, mortgage rates will likely stay near record lows for 2021, presenting an opportunity to get better rates.
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