U.S. mortgage rates fell in the third week of 2021, with the 30-year mortgage rate declining slightly after hitting the highest level since mid-November. According to Freddie Mac, the 30-year fixed-rate mortgage (FRM) averaged 2.77 percent for the week ending January 21, 2021 (down from 2.79 percent last week). A year ago, it stood at 3.60 percent.
Freddie Mac’s Chief Economist said “Mortgage rates have hovered near historic lows for almost a year, fueling purchase and refinance activity amid a global health crisis”. He added “We’re now seeing rates fluctuate a bit as political and economic factors drive Treasury yields higher.” As you can see above, the 30-year mortgage rate has been consistently below 4 percent since June 2019.
The decline in borrowing costs has supported the housing industry and especially prices. As a matter of fact, in October, the S&P CoreLogic Case-Shiller index (20-City Composite) increased at the fastest pace since June 2014 and is heading for double-digit increases at some point in 2021.
Meanwhile, the level of refinancing applications is also expected to remain elevated*. Data published, earlier this week, showed that the refinance index decreased by 4.7 percent in week ended Jan. 15 (v +20.1 percent w/w prior). However, they were still up 17.9 percent compared to the last week of December.
*Note: Usually, it’s beneficial to refinance if the interest rate is at least 50 basis points lower than the current rate a homeowner has, depending on how high the closing costs are.