The rate on a 30-year fixed mortgage fell five basis points to 2.95% this week, according to Freddie Mac. Rates have hovered around the 3% mark for about a month in the mortgage giant’s survey.
Mortgage rates plunged in 2020 as the U.S. economy sagged during the coronavirus pandemic, but most experts expect 2021 to end with higher rates overall – though still low compared to historical standards.
In a separate survey by Bankrate, the 30-year average rate also fell to 3.16%. The variance with the Freddie Mac count is due to the fact that the Bankrate figure includes points and set-up fees by an average of 0.32%, while the Freddie count excludes these costs. Freddie Mac said his rate came with an average of 0.8 points.
“Mortgage rates are below 3%, continuing to offer many homeowners the ability to refinance and increase their monthly cash flow,” Sam Khater, chief economist at Freddie Mac, said in a statement. “In fact, homeowners who refinanced their 30-year fixed rate mortgage in 2020 saved over $ 2,800 per year. Substantial opportunities continue to exist today, as nearly $ 2 trillion in compliant mortgages have the capacity to refinance and reduce their interest rates by at least half a percentage point.
As Khater said, lower mortgage rates are great for refinancers, but the current market for potential buyers is more mixed. Low mortgage rates remain a favorable factor, but the limited supply of housing coupled with increased borrowing power is pushing prices up and growing competition significantly in most places. The mortgage and real estate markets can be particularly ruthless for low-income and minority homeowners, which may partly explain why more black and Hispanic homeowners haven’t refinanced.
Where do mortgage rates go from here?
Most industry watchers expect rates to rise in the weeks and months to come, but predict they will stay very low by historical standards, possibly for years to come.
Highlighting the instability of the market, most of the mortgage experts interviewed by Bankrate Expect rates to drop in the coming week.
“We’re stuck here and the stock market still hasn’t made a correction to send money into bonds,” said Logan Mohtashami, real estate analyst at HousingWire in Irvine, Calif.