The average U.S. mortgage rate for a 30-year fixed loan rose this week to 2.84%, Freddie Mac said in a report on Thursday – up 6 basis points from the previous all-time record low set last week.
The average fixed rate for a 15-year mortgage also gained slightly by 2 basis points to 2.34%.
Despite this week’s rise, there have still been 16 consecutive weeks when average mortgage rates have been below 3%. However, this week’s slight gain was most likely a result of positive news about a COVID-19 vaccine, said Sam Khater, Freddie Mac’s chief economist.
“Despite this rise, mortgage rates remain about a percentage point below a year ago and the low rate environment is supportive of both purchase and refinance demand. Heading into late fall, the housing market continues to grow and buttress the economy,” Khater said.
In an effort to buffer economic blows, the Federal Reserve began buying bonds in March to make borrowing cheaper – eight months later and those rates are still feeding a frenzied market despite upward pressure on home prices.
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How long these low rates will last is still up for debate, but in September, 13 members of the Federal Reserve’s Federal Open Market Committee said they expect to keep the central bank’s benchmark rate near zero through 2023.
Fannie Mae’s Home Purchase Sentiment Index, a composite index designed to track the housing market and consumers’ desire to sell or buy a home, also revealed consumers and the industry alike are confident that a low rate environment will hold. Those who believe they will rise in the coming 12 months dropped to 32%, and 49% now believe they will stay the same – up from 44% in September.
Doug Duncan, Fannie Mae’s senior vice president and chief economist, noted much like the 2016 election, the 2020 election may have lasting and unexpected impacts on the market over the coming months. However, observers from across the housing and mortgage space said interest rates will continue to hover near historic lows for the next several years, regardless of who occupies the White House.