The average interest rate on a 30-year fixed-rate mortgage fell this week to a record low of 2.88%, according to Freddie Mac. That is the lowest level in nearly 50 years of the mortgage giant’s survey. The 15-year fixed-rate mortgage dropped to 2.44%.
“We expect rates to remain low and continue to propel the buying market forward,” said Sam Khater, chief economist at Freddie Mac. “However, the main barrier to increasing demand remains the lack of inventory, especially for entry-level homes.”
The number of homes for sale has fallen to some of the lowest levels on record, said George Ratiu, the senior economist at Realtor.com. This has led to a frenzied environment of multiple bids, price scaling clauses and inspection exemptions.
“Historically-low mortgage rates have pushed the demand for real estate because buyers are in a hurry to close low monthly payments,” he said. “Sellers remain aware of listing and are often buyers themselves for their next home, so they continue to struggle with the same limited supply.”
Prospective homebuyers also oppose stricter lending standards, Ratiu said.
“At this rate, stricter lending standards and low inventory will push the activity of housing and we will see a substantial reduction in sales in the second half of this year,” he said.
The MBA expects rates to remain at these low levels, encourage strong refinancing activity and offer homeowners some relief during these uncertain economic times with lower monthly mortgage payments, said Joel Kan, MBA’s associate vice president of economic and sector forecasts.
But he noted that loan balances are going up.
“Buying loan balances continued to climb, which is often a sign that the still weak labor market and tighter credit for government loans are limiting some first-time homebuilders.”
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