Mortgage rates hit a new low again this week — marking the 10th time this year they’ve carved out a record — and experts said they could go even lower.
The average 30-year fixed mortgage rate fell to 2.81% this week from 2.87% in the prior week, according to Freddie Mac, a government-sponsored agency that backs millions of mortgages. The previous low was on September 10 when rates reached 2.86%.
The decline allows homeowners to lock in a lower rate to get a smaller monthly payment, and encourages more buyers to flood into an already competitive housing market.
“Lower rates will continue to stimulate refinance,” said Dr. Frank Nothaft, chief economist at CoreLogic, a data and analytics firm. “And also, by lowering monthly mortgage payments, provide an opportunity for first-time buyers to achieve homeownership.”
About 19 million U.S. homeowners could reduce their mortgage rate by at least three-quarters of a point by refinancing, according to data provided to Yahoo Money from Black Knight, a mortgage analytics firm. These refinance candidates could save $304 per month on average.
The record-low rate may also persuade new buyers to enter the market, but still they face other headwinds to homeownership.
“At these low levels, mortgage rates are still driving substantial and unseasonably high housing demand, while supply from existing sellers and new construction has struggled to keep up,” said Danielle Hale, chief economist at Realtor.com. “But we’ll also need to see continued economic recovery or else buyers may run out of steam.”
George Raitu, senior economist at Realtor.com, said rates could fall as low as 2.5% to 2.6%, following the trajectory of government bonds, which mortgage rates track. But the benefit of low rates is starting to wane because of the “one-two punch” of stricter lending standards and rising home prices, he said.
“Many lenders, wary of the economic outlook and borrowers’ ability to repay loans, have required higher credit scores and down payments, effectively sidelining younger buyers,” he said. “Meanwhile, overwhelmed by strong demand, they have also pushed rates for refinances higher, dampening the benefit for many homeowners.”