Benchmark mortgage rates again dropped below 3%, giving Americans yet another opportunity to refinance, and lock in historically low financing.
The 30-year fixed-rate mortgage averaged 2.95% for the week ending May 27, down five basis points from the previous week, Freddie Mac FMCC, reported this week. A year ago, the 30-year loan was averaging 3.15%.
The 15-year fixed-rate mortgage dropped two basis points to an average of 2.27%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.59%, the same as the previous week.
“ So long as inflation remains a concern, there could be volatility in mortgage rates as lenders and bond buyers try to guess what the Fed will do next. ”
So how much is at stake? Across the country, there remain many homeowners who could stand to save boatloads of money by refinancing their mortgage.
Currently, there is $2 trillion-worth of conforming mortgages — meaning mortgages that are backed by Fannie Mae FNMA, and Freddie Mac — that could reduce their interest rate by almost half a percentage point if they refinanced, Freddie Mac chief economist Sam Khater said in the report.
To put that figure in perspective: “Homeowners who refinanced their 30-year fixed-rate mortgage in 2020 saved more than $2,800 dollars annually,” Khater said.
It is unclear how much longer mortgage rates will remain this low. This week’s downward move was likely a reflection of the market’s reaction to statements made by officials from the Federal Reserve and the European Central Bank, said Zillow Z, +1.71% ZG, +1.39% economist Matthew Speakman.
“ ‘Homeowners who refinanced their 30-year fixed-rate mortgage in 2020 saved more than $2,800 dollars annually.’ ”
“The central banks remain relatively undeterred by recent sharp increases in inflation and are confident in their ability to curb the impacts of rising prices without slamming the brakes of the economic recovery,” Speakman said.
Before these recent comments, he said, “bond yields and mortgage rates had been tip toeing upward in the past couple of weeks as investors grew increasingly confident that stronger-than-expected inflation would indeed force the Fed to tighten policy sooner than they had previously stated.”
So long as inflation remains a concern, there could be volatility in mortgage rates as lenders and bond buyers try to guess what the Fed’s next move will be.
In the meantime, homeowners aren’t the only ones benefitting from low rates.
“Buyers who purchased a home in the past year and locked in record-low rates will benefit from predictable monthly payments as a hedge against inflation concerns,” said George Ratiu, senior economist at Realtor.com.
Low rates should continue to fuel the strong demand among home buyers. The good news for them is that more sellers appear to be entering the market. That will give buyers more choice and should reduce competition for homes a bit, which could eventually help to slow the record price growth the market has seen in recent months.