- The average US 30-year fixed mortgage rate dipped to 2.71% from 2.72%, Freddie Mac said Thursday.
- The new level marks the rate’s 14th record low of the year. Near-zero interest rates have pushed borrowing costs to historically low levels and fueled a buying spree in the nation’s housing market.
- Limited supply and soaring demand stand to price out potential homebuyers and erode the benefits of a low-rate environment, Sam Khater, chief economist at Freddie Mac, said in a statement.
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Mortgage rates dipped to their 14th record low of 2020 last week, further boosting the housing market’s buying spree.
The average 30-year fixed mortgage rate dropped to 2.71% from 2.72%, Freddie Mac said Thursday. That’s down from 3.68% in the year-ago period.
Mortgage rates began sliding to all-time lows at the start of the coronavirus pandemic following the Federal Reserve’s emergency interest-rate cuts. The central bank has indicated the benchmark rate will likely remain near zero into 2024, signaling rates have room to drop lower.
The historically low borrowing costs have helped the housing market serve as a rare boon to the virus-hit economy. Home sales have surged, yet supply has struggled to keep up with the rapid pace. That misbalance stands to price out potential homebuyers, said Sam Khater, chief economist at Freddie Mac.
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“Unfortunately, the record low supply combined with strong demand means home prices are rapidly escalating and eroding the benefits of the low mortgage rate environment,” Khater said in a statement.
Bank of America strategists expect home prices to climb 5.9% in 2020 and another 4% through next year. A stronger-than-expected economic recovery could lift prices higher still as low rates and soaring growth boosts overall spending.
There’s still the risk that much of the year’s gains were pulled forward by the pandemic, the strategists added. Such a trend could lead to slower housing-market growth after a virus vaccine is rolled out, according to the bank.
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