Mortgage rates hitting record low as the year starts

mortgage rate record new low

Mortgage rates fell to a record low last week to kick off the new year. Federal Home Loan Mortgage Corporation Freddie Mac, stated that the average interest rate on a 30-year fixed-rate mortgage dropped to 2.65%. That’s the lowest level in the nearly 50 years that the mortgage giant has been publishing the survey. 

Meanwhile, the 15-year fixed-rate mortgage dropped to 2.16%. Current rates are nearly a full percentage point lower than a year ago, when the 30-year fixed-rate averaged 3.64% and the 15-year was 3.07%.

While the low rates have brought home buyers into the market, high demand and low inventory has increased prices.

Sam Khater, Freddie Mac’s chief economist mentioned that housing affordability has decreased because these low rates have been offset by rising home prices, despite a full percentage point decline in rates over the past year. 

However, he added that the forces behind the drop in rates have been shifting over the last few months and predicts that the rates are poised to rise modestly this year.

It’s believed that the combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential homebuyers during the spring home sales season.

Even more to the point, now buyers can still take advantage of low rates to offset the steep rises in home prices that have occurred in many parts of the US over the last year.

Buying a house will continue to be challenging, given the median listing price was up 13.4% from a year ago while the number of homes for sale dipped below 700,000 for the first time.  

IPG Group Market Analyst Mr Damon Harrison advised investors to look into alternative investment for instance Mortgage-Backed Securities (MBS). He suggests home buyers to turn their mortgage loans into securities and generate liquidity. This is one of the ways to improve housing affordability.  

Damon Harrison
Market Analyst, IPG Group