Rates on 30-year fixed-rate mortgages dropped last week to their lowest level since mid-February: an average 2.93%, down from 2.96% a week earlier, mortgage giant Freddie Mac reported on Thursday.
One year ago, America's most popular home loan was averaging 3.13%.
Already historically low mortgage rates have been working their way downward since early April, but that trend is likely reverse course in the coming weeks, says Danielle Hale, Realtor.com’s chief economist.
Last week, the Federal Reserve released projections showing its policymakers now expect to raise interest rates twice in 2023. At a meeting in March, the officials had indicated the Fed was likely to hold its benchmark rate close to zero until at least 2024.
“The 10-year Treasury rates already moved higher following the Fed’s meeting, and we expect mortgage rates to follow,” Hale says. Mortgage rates tend to move in sync with the interest, or yield, on the Treasury's 10-year note.
The "more hawkish signals from the Fed may finally usher in some meaningful upward movements in mortgage rates," warns Zillow economist Matthew Speakman.
The average rate on a 15-year fixed-rate mortgage did increase last week — but just a hair, to 2.24% from 2.23% the previous week, according to Freddie Mac’s long-running survey.
A year earlier, 15-year rates were averaging 2.58%.
The shorter-term home loans are popular among the refinancing crowd, particularly homeowners who can afford higher monthly payments and want to cut their lifetime interest costs.
5/1 adjustable-rate mortgages
The typical rate on a 5/1 adjustable-rate mortgage fell to 2.52% last week, from 2.55% the week before and 3.09% a year ago.
ARMs usually start out with lower rates than their fixed-rate cousins, but after a period of time the rates can "adjust" up or down, in step with the prime rate or some other benchmark.
The loans are called "5/1" ARMs because they're fixed for the first five years and then adjust every (one) year after that.
14M still can benefit from refinancing
Homeowners are waking up to the fact that grabbing hold of cheap mortgage rates while they last can result in hundreds of dollars in monthly refinance savings.
Refinance mortgage applications were up 5.5% week over week in the Mortgage Bankers Association’s most recent survey.
Even so, some 14.1 million mortgage holders still stand to benefit from a refi, according to the latest data from Black Knight, a mortgage technology and data provider.
Those with 30-year mortgages who have at least 20% equity in their homes and are current on their payments are "high-quality refinance candidates" and could save an average $287 a month, Black Knight says.
Those homeowners also should have credit scores of at least 720 and be able to shave at least three-quarters of a point (0.75) off their mortgage rates by refinancing. If you're not sure where your credit stands, it's easy today to take a look at your credit score for free
Comparison shopping will help you find the best mortgage rate. Multiple studies have found that borrowers who seek out quotes from five lenders can save thousands over time, versus a borrower who reviews only one loan offer.
Shopping around also works well when you're buying or renewing your homeowners insurance. By gathering and comparing prices from multiple insurers, you could find a company that will offer the coverage you need but for hundreds less each year than you're currently paying.