Average mortgage rates for a 30-year fixed mortgage increased to 2.87% this week, the second-lowest on record, rising one basis point from last week’s all-time low of 2.86%, while the less-popular 15-year rate fell to a new low of 2.35%, Freddie Mac said on Thursday.
The 30-year rate has broken records nine times since March because of a Federal Reserve bond-buying program that has poured about $1 trillion into the mortgage markets. The central bank resurrected a program it first used during the financial crisis a dozen years ago to create competition for bonds and cause the yields that influence mortgage rates to shrink.
The Fed issued a statement on Wednesday after the end of a two-day meeting that said it would likely keep its benchmark overnight lending rate near zero through 2023, and would continue purchasing mortgage-backed securities “at least at its current pace” for as long as necessary.
Mortgage lending volume this year is likely to break records as homeowners refinance and new buyers scramble to take advantage of some of the cheapest financing costs history, Fannie Mae said in a forecast on Tuesday.
Originations this year are expected to reach an all-time high of $3.9 trillion, boosted by $2.4 trillion in refinancings, the highest level since 2003 and more than double the volume seen in 2019, the mortgage giant said.
“We continue to believe that a low-rate environment will support refinance demand over the forecast horizon,” Fannie Mae said in the forecast. “At the current interest rate of 2.86%, we estimate that nearly 69% of outstanding first-lien loan balances have at least a half-percentage point incentive to refinance.”
The annual average U.S. rate for a 30-year fixed mortgage will be 3.1% in 2020 and 2.7% in 2021, the forecast said, matching Fannie Mae’s prior monthly projection. Both would be the lowest annual averages on record.