After falling to the lowest rate in Freddie Mac’s Primary Mortgage Market Survey’s near 50-year-history last week, the average U.S. mortgage rate for a 30-year fixed loan remained at a survey-low 2.67% this week.
Last week’s announcement of a 2.67% rate broke the previous record set on Dec. 3, and was the first time the survey reported rates below 2.7%.
The average fixed rate for a 15-year mortgage also fell this week to 2.17% from 2.19%. One year ago, 15-year average fixed rates were reported at 3.16%.
“All eyes have been on mortgage rates this year, especially the 30-year fixed-rate, which has dropped more than one percentage point over the last twelve months, driving housing market activity in 2020,” said Sam Khater, Freddie Mac’s chief economist. “Heading into 2021 we expect rates to remain flat, potentially rising modestly off their record low, but solid purchase demand and tight inventory will continue to put pressure on housing markets as well as house price growth.”
Freddie Mac has reported survey-low rates 16 times in 2020, proving beneficial to borrowers looking to buy or refinance a home amid economic turmoil outside of the industry.
Mortgage spreads continue to compress, per Freddie Mac officials, with the 10-year Treasury yield remaining at or above 90 basis points through the beginning of December.
This week’s 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.71%, down from last week when it averaged 2.79%. That’s another sharp drop-off from this time last year, when the 5-year ARM averaged 3.46%.
The Federal Open Market Committee revealed earlier this month that the Federal Reserve plans to keep interest rates low until labor market conditions and inflation meet the committee’s standards. Overall, Fed purchases have helped to drive mortgage rates and other loan interest rates to the lowest level on record by boosting competition for bonds.
Higher rates may be around the corner, as the calendar flips to 2021 and the promise of a second COVID-19 stimulus check along with a vaccine reaches consumers. The Mortgage Bankers Association has forecasted rates for 30-year fixed-rate loans rising to an average of 3.2% by the end of 2021.
But if the virus is not controlled in the new year, investors may remain cautious and consumer confidence could wane – keeping rates low, according to the MBA.