Mortgage rates go lower as economists ease anxiety over inflation

A week after it hit 3%, the average 30-year fixed-rate mortgage headed back down, as inflation concerns subsided temporarily.

The average 30-year fixed-term mortgage dropped to 2.95% for the weekly period ending May 27, according to Freddie Mac’s weekly Primary Mortgage Markets Survey, down from 3% the previous week. One year ago, the average came in at 3.15%.

The 30-year average rate has see-sawed in 2021, frequently in response to worries that inflation concerns might necessitate an increase in interest rates. But recent rate upticks have subsequently retreated, as experts, to a large degree, shrugged off data suggesting a potential overheating of the U.S. economy, such as the sharp rise in prices of consumer goods.

“Statements from Federal Reserve presidents and the president of the European Central Bank indicated to markets that the central banks remain relatively undeterred by recent sharp increases in inflation and are confident in their ability to curb the impacts of rising prices without slamming the brakes of the economic recovery,” said Zillow economist Matthew Speakman.

Relatively low and stable interest rates — 30-year-rate average has stayed under 3% the majority of weeks since last July — should continue to encourage homeowners to seek refinancing, according to Freddie Mac chief economist Sam Khater.

“Homeowners who refinanced their 30-year fixed-rate mortgage in 2020 saved more than $2,800 dollars annually. Substantial opportunity continues to exist today, as nearly $2 trillion in conforming mortgages have the ability to refinance and reduce their interest rate by at least half a percentage point.”

Homeowners have taken note this year, as the refinance share of total mortgage application volume has stayed above 60% for all but one week, according to Mortgage Bankers Association reports. Heavy refinancing activity comes as housing inventory remains low, driving new home purchases down.

The average of 15-year fixed-term mortgages also registered a weekly decrease, coming in at 2.27%, compared to 2.29% one week earlier. At the same time one year ago, the average was 2.62%.

The 5-year Treasury-indexed adjustable-rate mortgage average saw no change, remaining at 2.59% week over week. In the same week of 2020, the 5-year ARM averaged 3.13%.

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