Mortgage rates fell below 3% this week, the first time since the end of February, creating a bigger savings opportunity for homeowners and buyers facing a tough housing market.
The rate on the 30-year fixed mortgage fell to 2.97% from 3.04% last week, according to Freddie Mac, a government-sponsored agency that guarantees millions of mortgages. That's the lowest rate since the week of Feb. 25 and down from 3.33% a year ago.
Confidence that the Federal Reserve will keep its benchmark fed funds rate where it is for the foreseeable future, is pushing down interest rates in general.
"Long-term bond rates, which shifted from a gradual climb to an accelerated one in early 2021, have done an about-face since mid-March due to the Fed’s patient approach to monetary policy," said Danielle Hale, chief economist of Realtor.com. "This has given investors confidence that the Fed won't push rates up too quickly."
'A small resurgence in refinance activity'
The lower rate opens the door for 14.6 million high-quality homeowners to shave at least three-quarters of a point off their current rate by refinancing, according to data provided exclusively to Yahoo Money from Black Knight, a mortgage technology and data provider. That's 3.4 million more than the first of the month when the 30-year rate was 3.18%, a high for 2021 and the highest level since mid-June of last year.
On average, those homeowners could save $285 monthly, according to Black Knight, for a potential aggregate savings of $4.1 billion a month.
Refinance activity jumped as rates declined, according to the Mortgage Bankers Association (MBA). The volume of refinance applications increased 10% last week from the previous week, but remained 23% lower than the same week a year ago,
“Mortgage rates dropped to their lowest levels in around two months, prompting a small resurgence in refinance activity after six weeks of declines," said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a statement. "Borrowers acted on the decrease in rates for most loan types."
'Plenty of buyers looking for homes'
While buyers still must contend with a lack of supply and increasing prices, lower rates can make a home purchase more in reach.
"Today's mortgage rates give most homebuyers a much needed leg up in grappling with higher home prices, which nearly every housing market across the country is seeing right now," Hale said.
Median prices for previously owned homes hit a fresh high of $329,100 in March since NAR started tracking median prices in 1999, according to the National Association of Realtors (NAR). That also marked the fastest pace of growth on record.
Sales, on the other hand, slipped because buyers still can't find enough homes to buy. Last month, sales of existing homes dropped 3.7% to a seasonally adjusted 6.01 million from the previous month.
"Going forward, I think there will be plenty of buyers looking for homes, and I think we'll still see climbing mortgage rates, but I expect the increases to be more gradual which will make it easier for buyers to adjust to higher monthly payments," Hale said. "With inventory still low, the biggest hurdle for most buyers will still be finding a home, but even that should get a bit easier as we see a seasonal ramp up in sellers."