Record-low mortgage rates continued in the past week, and with that, homeowners marked historically high levels of tappable equity and refinance ability.
Freddie Mac reported that the 30-year fixed-rate mortgage in its survey ending July 2 fell to 3.07 percent, the lowest rate in the survey’s history, dating back to 1971.
The Mortgage Bankers Association said its survey reached a record-low, falling to 3.29 percent for a 30-year fixed-rate mortgage. Mortgage News Daily reported a full week of 30-year rates below 3 percent, in a range of 2.94 percent to 2.97 percent.
“Mortgage rates continue to slowly drift downward with a distinct possibility that the average 30-year fixed-rate mortgage could dip below 3 percent later this year,” Freddie Mac Chief Economist Sam Khater said in a press release. “On the economic front, incoming data suggest the rebound in economic activity has paused in the last couple of weeks with modest declines in consumer spending and a pullback in purchase activity.”
The record-low rates kept mortgage applications humming. MBA said purchase applications for the week ending June 26 were 15 percent higher than a year ago, while refinance applications were 74 percent higher than 2019.
“Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The average purchase application loan size increased to a record high in our survey – more proof that tight inventory conditions are leading to faster price growth.”
“The 30-year fixed rate has been below the 3.5 percent mark since late March. It is possible that many borrowers have already refinanced or are waiting for rates to go even lower.”
The mortgage rates have helped borrowers reach a record high of $6.5 trillion in tappable equity, up 8 percent year-over-year in the first quarter, according to Black Knight, Inc.
Through June 19, Black Knight Data & Analytics President Ben Graboske said cash-out refinance locks were down 6 percent from the comparable time frame in the first quarter 2020, while rate/term locks were up 13 percent.
“The environment is ripe for that surge of rate/term refinance lending to continue as well,” Graboske said in a release.
The dip in Freddie Mac’s interest rate survey from 3.125 percent to 3.07 percent increase Black Knight’s pool of prime candidates for refinancing by 20 percent to 16.3 million borrowers.
That pool includes borrowers who are current on the mortgage and can drop their rate by at least 0.75 percent by refinancing.
Before the drop, with a pool of 13.6 million candidates, Black Knight said they could save an average of $283 a month, for an aggregate potential savings of $3.9 billion a month.