WASHINGTON–Mortgage rates, which not long ago were predicted to be in for a slow but moderate increase during 2021, instead fell again last week, the third straight weeks have remained below 3%.
According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage fell to 2.96%, while the 15-year fixed-rate mortgage dropped to 2.30%.
For home shoppers facing low inventories of existing homes, and with skyrocketing lumber prices adding more than $38,000 to the price of new homes, according to one report, the low rates offer at least a bit of relief. The scenario also offers opportunities to tap home equity.
When 2021 got underway rates were at their lowest levels ever, before beginning to climb and cresting 3% in March. But rates began to decline again in April, although forecasts again call for a steady but slow increase this year.
‘Good for Homebuyers’
"The combination of low and stable rates, coupled with an improving economy, is good for homebuyers," said Sam Khater, Freddie Mac's chief economist, in a statement. "It's also good for homeowners who may have missed prior opportunities to refinance and increase their monthly cash flow."
The Mortgage Bankers Association, however, reported refinances were flat last week and purchase applications fell a bit in its survey.
Both conventional and government-backed loan applications declined, said Joel Kan, the MBA’s associate VP-economic and industry forecasting, but the average loan size increased for both types.
"This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity," Kan told CNN. "The higher prices are also affecting the mix of activity, with stronger growth in purchase loans with larger-than-average balances."
Some Positive News
Mortgage rates have also been affected by numerous pieces of positive economic news caused by an unexpected decline in Treasury yields, George Raitu of Realtor.com told CNN.
In addition, in a promising note for desperate buyers, Ratiu said the latest weekly update from Realtor.com shows that the number of sellers choosing to list their home is growing, as a rising number of larger states, including Florida, New York, and New Jersey announced they are loosening or removing Covid restrictions.
"For first-time homebuyers, rising inventory and low interest rates open the window of opportunity wider as we move through May, hinting that we might see price gains begin to moderate," Ratiu said.