Mortgage rates drop nearly 3%, offering refinancing opportunity for some homeowners
Mortgage rates fell for the second week in a row, once again approaching 3% and providing a new window for homeowners to refinance.
The 30-year fixed mortgage rate slipped to 3.04% from 3.13% the week before, according to Freddie mac, a government-sponsored agency that backs millions of mortgage loans. A year ago, the rate was 3.31%.
“Even though recent data shows signs of rising inflation, President Powell and other members of the Federal Reserve expect this to be temporary. Investors seem to agree,” said Danielle Hale , Chief Economist of Realtor.com. “If investors expected higher inflation, they would push up interest rates, including mortgage rates. Plus, with the possibility of slower vaccine rollouts in the short term and economic uncertainty that this could lead to, rates have come down this week. “
Hale called the drop “temporary” and expects rates to resume their earlier uptrend. Likewise, Freddie Mac predicts that rates will reach 3.2% for 2021 in his quarterly forecast.
A refinancing opportunity opens
The decline has allowed more homeowners to refinance their mortgages at lower rates.
At this week’s rate, more than 13 million high-quality homeowners could reduce their current rate by at least three-quarters of a point, an increase of 2 million from last week, according to data provided by Black Knight, a provider of mortgage technology and data. .
On average, these owners could save $ 283 per month, according to Black Knight, with 2.5 million savings of at least $ 400 per month and 1.5 million savings of $ 500 or more each month.
Refinancing activity declined as rates rose after hitting a all-time low of 2.65% in the first week of January. The volume of refinancing applications fell 5% last week from the previous week and was 31% lower than the same week a year ago, according to the Mortgage Bankers Association (MBA).
“Many borrowers have already refinanced at lower rates or are unwilling – or unable – to refinance at current rates,” said Joel Kan, associate vice president of economic and industrial forecasting at MBA on Wednesday.
‘Big step in the right direction’
On the homebuying front, lower rates are good news, but buyers still face major barriers to homeownership – namely limited supply and price hikes at home. two digits.
Freddie Mac estimated that the US housing market needs an additional 3.8 million single-family homes to meet the country’s current demand. This represents a 52% increase in the inventory shortage from 2018, the first time Freddie calculated the shortage.
Fortunately for market-weary buyers who are increasingly worried about the state of the housing market, as measured by Google searches for the term ‘housing bubble’ and related concerns, the seasonal trends are lining up to bring a some relief, ”Hale said.
Weekly data from Realtor.com showed new sellers this week were up 36% from a year ago.
“It won’t solve the inventory crisis overnight, but it’s a big step in the right direction,” Hale said, “and we’ll likely see more of it in the coming weeks as we approach the best time of year to sell a house. “