Mortgage rates held near record lows for another week, as some states move to re-open from coronavirus shutdowns and home prices showed surprising resiliency.
The average interest rate for a 30-year-fixed rate mortgage hit 3.26%, with 0.7 points paid, for the week ending May 7, according to Freddie Mac. That's up 0.03 percentage points from the record low of 3.23% set last week.
The rate on 15-year fixed-rate mortgages fell to 2.73%, down 0.04 percentage points from the previous week, which had matched the March 2020 low of 2.77%. The rate was still slightly above the May 2013 all-time low of 2.56%. Interest rates on five-year adjustable-rate mortgages increased to 3.17%, up 0.03 percentage points from 3.14% one week ago.
Interest rates have decreased sharply since the beginning of the year, as fears of the coronavirus have sent investors rushing to purchase safe-haven assets like Treasury bonds, and the Federal Reserve cut short-term interest rates to close to zero. Mortgage rates are largely pegged to 10-year Treasury notes.
While most mortgage activity has centered around refinancing, Freddie Mac credits the low rates with improving home purchase activity in recent weeks. According to data from the Mortgage Bankers Association, home purchase mortgage applications rose 1% for the week ended May 1, while refinancing applications decreased by 2%. Strong purchasing activity in Arizona, Texas, and California led the increase in purchase activity.
Many realtors and homeowners are optimistic that the real estate market, which all but froze in some markets as sellers yanked listings amid coronavirus lockdowns, will quickly rebound as more states begin to re-open. Nationally home prices actually rose in March, according to one measure.
The MBA attributes the slight decrease in mortgage refinancing activity to banks offering slightly higher interest rates for this type of loan, as well as the decision by many banks to stop offering cash-out refinances due to their inability to sell these loans to Freddie Mac and Fannie Mae. Despite this slight downturn, refinancing activity was 210% higher than the same week ending in 2019.