Photo: James Bombales
When it comes to mortgage rates, ‘How low will they go?’ is the question on everyone’s mind. The 30-year fixed mortgage rate held steady at 3.13 percent this week, according to the results of Freddie Mac’s latest survey. While the rate was unchanged from the previous week, it remains at the lowest level recorded since 1971 when the government-sponsored mortgage buyer began tracking average rates.
Record-low mortgage rates have encouraged buyers to step off the sidelines despite the ongoing pandemic and inventory shortage, causing home prices to inch higher. Buyers are now able to purchase more expensive homes with lower monthly payments. Compared to the same period a year ago, average rates have declined by 5.5 percent.
“After the Great Recession, it took more than ten years for purchase demand to rebound to pre-recession levels, but in this crisis, it took less than ten weeks,” said Sam Khater, Freddie Mac’s Chief Economist.
“The rebound in purchase demand partly reflects deferred sales as well as continued interest from prospective buyers looking to take advantage of the low mortgage rate environment.”
During the week ending June 19th, mortgage applications dipped 8.7 percent on a seasonally adjusted basis over the previous seven-day stretch, according to the Mortgage Bankers Association’s (MBA) most recent survey. Activity levels appear to be normalizing after a flood of buyers submitted applications at the end of May when rates sank to an all-time low.
Up until this point, the volume of mortgage applications had been trending higher than year-ago levels for five straight weeks. However, it’s still 18 percentage points above levels observed during the same week one year ago.
“One factor that may potentially crimp growth in the months ahead is that the release of pent-up demand from earlier this spring is clashing with the tight supply of new and existing homes on the market,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
“Additional housing inventory is needed to give buyers more options and to keep home prices from rising too fast.”
Several experts have predicted that mortgage rates could fall below 3 percent by the end of the year, but it remains to be seen what effect that would have on the housing market if economic conditions don’t improve.