Mortgage rates slipped below 3% again, providing another opportunity for homeowners to refinance. Buyers, on the other hand, face other housing challenges that offset the benefits of low rates.
The rate on the 30-year fixed mortgage — the most common home loan — fell to 2.95% this week, down from 3% last week, according to Freddie Mac, a government-sponsored entity that backs millions of mortgages. The rate was 3.15% a year ago this week and hit an all-time low of 2.65% in January.
“The slide in consumer confidence and declines in home sales — both new and existing — further influenced the move toward bonds,” George Ratiu, senior economist at Realtor.com, told Yahoo Money. “With 10-year Treasury yields dropping, mortgage rates followed suit, sliding below 3%.”
Right now, rates continue “to offer many homeowners the potential to refinance and increase their monthly cash flow,” said Sam Khater, Freddie Mac’s chief economist, in a press release, noting that homeowners who refinanced last year saved more than $2,800 annually.
The rate on nearly $2 trillion in mortgages could be reduced by at least a half point through refinancing at current rates, Khater added.
In the housing market, many homebuyers may have a tough time taking advantage of the low rates, though. There’s still a historically low number of homes for sale, which has pushed the volume of sales down. The number of homes under contract to be sold unexpectedly fell 4.4% in April from the previous month, according to the National Association of Realtors, which cited the lack of supply.
But housing prices continue with record increases this year. The latest S&P CoreLogic Case-Shiller national home price index released on Tuesday showed that home values jumped 13.2% year over year in March, marking the fastest pace in more than 15 years.
Ratiu expects rates to gradually rise this year, averaging 3.2% for 2021 as economic activity and employment strengthen.
“We are entering a volatile period for mortgage rates over the next few months,” he said, “as investors react to wide business re-openings, while taking monetary changes into consideration.”