Mortgage Rates Hit New Record Low
The new year has started with a bang, and we’re not just talking about fireworks. This financial explosion has affected mortgage rates, which have plummeted to an all-time low just days into 2021.
In a report published by Freddie Mac, the mortgage enterprise revealed that mortgage rates are continuing to drop steadily. An all-time low was reached just as the new year dawned, resulting in tectonic shifts in housing purchases across the United States.
Currently, the 30-year fixed-rate mortgage stands at 2.65%, a whole percentage point down from last year. The 15-year FRM is down to 2.16%, while the five-year ARM is sitting at 2.75% at the time of writing. The latter has seen the smallest drop of the bunch thanks to spikes in late November, but it continues to trend downwards.
According to Freddie Mac’s data, the 30-year FRM experienced nine significant drops during 2020 alone, mostly thanks to the Federal Reserve bond-buying program. This led to an influx of $1 trillion into the mortgage market, with even more to come this year.
This precarious situation has created a double-edged sword of sorts. On one hand, there’s a significant increase to demand as housing is becoming more affordable. At the same time, prices are steadily rising for the same reasons, offsetting the lower-than-ever rates. The experts from Freddie Mac predict this accelerated purchasing will lead to housing becoming much less affordable for potential buyers during this year alone.
In a recent interview, Danielle Hale from Realtor.com further explained what’s actually going on with housing in America. Hale stated that, on average, listing prices in December 2020 were up 13.4% compared to the same period a year ago. Meanwhile, there were fewer than 700,000 homes for sale, which is another all-time low for housing in the US. She believes the current record low mortgage rates won’t stay so low for so long. “The future outlook for mortgage rates is likely higher thanks to a changing landscape in Washington,” Hale said.
This sentiment is shared by other analysts, too. Current forecasts for 2021 put the average 30-year mortgage at 2.7%, which is still below the previous annual average of 3.1%.