Mortgage rates hit another historic low this week, according to Freddie Mac—but don’t expect ultralow rates to last forever.
The average 30-year fixed mortgage rate was 2.65% for the week ending Jan. 7, 2021, a new low, according to the company’s weekly survey of mortgage rates. In a release,
the company’s chief economist, said recent low rates have been offset by climbing home prices, challenging home affordability.
Home affordability emerged as a worry in the second half of 2020, as economists warned that swiftly rising prices were making it more difficult for some would-be buyers to enter the market, even amid historically low mortgage rates. High buyer demand, likely driven in part by shifts brought about by the pandemic, as well as historically low interest rates and shifting demographics, and a low supply of homes for sale have contributed to prices that climbed at the fastest pace in years in October, the latest month for which Case-Shiller index data is available.
But further pressure on home affordability could come as mortgage rates rise, Khater wrote in the release. The economist said he expects rates to increase modestly throughout 2021 as the economy recovers from the Covid-19 pandemic and vaccinations start to take effect, Khater wrote in an email to Barron’s. While Khater noted a rise in rates is dependent on vaccine distribution, he said rates will likely rise slowly, with the greatest increase in the second half of the year.
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