The rate on a 30-year fixed mortgage fell again this week in Freddie Mac’s survey, dipping below 3 percent for the first time since February to settle at an average of 2.97 percent.
With the U.S. economy sagging because of the coronavirus pandemic, mortgage rates plunged in 2020. Experts have long anticipated that this trend would reverse in 2021 as the economy rebounds, and for the most part, rates have been heading upward this year, though they have receded for much of this month.
In a separate survey of rates by Bankrate, the average 30-year rate also fell, averaging 3.21 percent. The gap with Freddie Mac’s number is because Bankrate’s figure includes points and origination fees averaging 0.32 percent, while Freddie’s number excludes those costs. Freddie Mac said its rate is accompanied by an average of 0.8 of a point.
“The drop in mortgage rates is good news for homeowners who are still looking to take advantage of the very low rate environment,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Freddie Mac research suggests that lower income and minority homeowners have been less likely to engage in the refinance market. Low and declining mortgage rates provide these homeowners the opportunity to reduce their monthly payment and improve their financial position.”
While lower mortgage rates are certainly a net good for refinancers, the current market for prospective homebuyers is a little more mixed. Low mortgage rates remain a favorable factor, but limited housing supply coupled with more borrowing power is pushing prices up and increasing competition significantly in most locations. As Khater mentioned, the mortgage and real estate markets can be especially unforgiving for low income and minority homeowners.
Where do mortgage rates go from here?
In the weeks and months ahead, the mortgage market may show some fluctuation, and the April downward trend is all but certain to reverse. However, most industry watchers think rates will remain very low by historical standards, possibly for years to come, even as they continue to inch higher.
Meanwhile, mortgage experts polled by Bankrate expect this lower rate reprieve to continue next week, with everyone predicting rates will either go nowhere or fall again.
“The good economic news has been priced in, and the Fed is consistent in their messaging that they intend to support the recovery with low rates for quite some time,” said Greg McBride, Bankrate’s chief financial analyst.