Mortgage rates remained below the 3% mark this week, rising a slight 0.1% to 2.98% over last week according to Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) [1]. A year ago at this time, the 30-year fixed-rate mortgage (FRM) averaged 3.23%.
“In light of the rising COVID caseloads globally, U.S. Treasury yields stopped moving up a month ago and have remained within a narrow range as the market digests incoming economic data,” said Sam Khater [2], Freddie Mac’s Chief Economist. “The good news is that with rates under 3%, refinancing continues to be attractive for many borrowers who financed before 2020. But, for eager buyers, especially first-time homebuyers, inventory continues to be extremely tight and competition for available homes to purchase remains high.”
Earlier this week, the Mortgage Bankers Association (MBA) reported [3] that mortgage applications slid this week, dropping 2.5% over the previous week. Also declining were the share of refi applications, decreasing 1% from the previous week to 60.6% of total application volume, 18% lower than one year ago.
Freddie Mac also noted that the 15-year FRM averaged 2.31% with an average 0.7 point, up from last week when it averaged 2.29%. A year ago at this time, the 15-year FRM averaged 2.77%. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.64% with an average 0.3 point, down from last week when it averaged 2.83%. A year ago at this time, the five-year ARM averaged 3.14%.
As Khater noted, low rates generally result in ideal times to buy and refi, as the National Association of Realtors (NAR) found that pending home sales increased in March [4], snapping two consecutive months of declines, rising 1.9% in March over February. Year-over-year, contract signings rose 23.3%, with the difference due in large part to the pandemic-induced lockdown in March 2020. This rise also comes on the news that the MBA is projecting purchase originations [5] on track to grow 16.4% to a new record of $1.67 trillion in 2021.
"Low inventory has been a consistent problem [6], but more inventory will show up as new home construction intensifies in the coming months, as well as from a steady wind-down of the mortgage forbearance program [7]," said Lawrence Yun [4], NAR's Chief Economist. "Although these moves won't immediately replenish low supply, they will be a step forward."