Mortgage rates remained close to record lows for another week as some states reopen after the coronavirus shutdown and home prices showed surprising resilience.
According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage was 3.26%, with 0.7 points paid, for the week ending May 7. That is 0.03 percentage point more than the record low of 3.23% last week.
The yield on 15-year fixed-rate mortgages fell to 2.73%, down 0.04 percentage points from the previous week, which tied in with the March 2020 low of 2.77%. The percentage was still slightly above the May 2013 low of 2.56%. Interest rates on five-year floating-rate mortgages rose to 3.17%, up 0.03 percentage points from 3.14% a week ago.
Interest rates have fallen sharply since the start of the year as coronavirus fears have prompted investors to buy safe-haven assets such as government bonds, and the Federal Reserve has cut short-term interest rates to nearly zero. Mortgage rates are largely linked to 10-year government bonds.
While most mortgage business has focused on refinancing, Freddie Mac attributes the low interest rates to the improvement in home purchases in recent weeks. According to data from the Mortgage Bankers Association, home purchase applications rose 1% for the week ending May 1, while refinancing applications fell 2%. The strong sourcing activity in Arizona, Texas and California led to an increase in sourcing activity.
Many real estate agents and homeowners are optimistic that the real estate market, which virtually stalled in some markets as sellers ripped lists amid coronavirus lockdowns, will bounce back soon as more states begin to reopen. Nationally, house prices even rose in March, according to a measure.
The MBA attributes the slight decline in mortgage refinancing to banks offering slightly higher interest rates on these types of loans, as well as the decision by many banks to stop offering refinancing due to their inability to sell these loans to Freddie Mac. and Fannie Mae. Despite this slight downturn, refinancing activity was 210% higher than in the same week ending 2019.
Refinance your mortgage for a lower rate, access cash or take out a low rate.
Refinancing a mortgage allows borrowers to pay off an existing mortgage and replace it with a new loan and refinance rate.