The average U.S. mortgage rate for a 30-year fixed loan is 2.88% this week, falling from last week’s 2.9%, Freddie Mac said in a report on Thursday. The rate is now two basis points from an all-time low set three weeks ago.
The average fixed rate for a 15-year mortgage was 2.36%, falling from last week’s 2.4% to a level that’s one basis point away from the record 2.35% set two weeks ago, the mortgage giant said.
It was the tenth consecutive week average mortgage rates have been below 3%, boosting demand for homes and driving up prices, said Sam Khater, Freddie Mac’s chief economist.
“As a result of low mortgage rates that have stayed under three percent since July, the housing market has seen a strong, upward trajectory during a very uncertain time,” said Khater. “We’re seeing potential homebuyers who now have more purchasing power.”
Pending home sales, measuring signed contracts to purchase properties, soared 8.8% in August to a record high, the National Association of Realtors said in a report on Wednesday.
“Tremendously low mortgage rates – below 3% – have again helped pending home sales climb in August,” said Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should in the absence of inflationary pressure keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”
The housing market typically plays a counter-cyclical role during recessions because economic slowdowns tend to push mortgage rates lower, Yun said. However, this time surpassed his expectations, he said.
“While I did very much expect the housing sector to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry bounce back so strongly and so quickly,” Yun said.
In March, the Federal Reserve started buying bonds – Treasuries and mortgage-backed securities – to prevent a credit crunch and make borrowing cheaper. Since then, the central bank has bought about $1 trillion of bonds backed by home loans, according to Fed data.
