We may have seen the bottom in the average 30-year fixed mortgage rate, at least for the next few weeks, said Freddie Mac Chief Economist Sam Khater in a report on Thursday that showed mortgage rates rising 2 basis points to 2.93% this week.
A rise in the yields on 10-year Treasuries, which serve as a benchmark for investors in mortgage-backed securities, will make it difficult for mortgage rates to move lower in the short-term, Khater said. In the first week of August, the 30-year average rate fell to an all-time low of 2.88%, according to Freddie Mac data.
In recent weeks, the “spread,” meaning the difference between mortgage rates and 10-year Treasury yields, have narrowed, but Khater said that isn’t likely to be enough to overcome the rise in the so-called long bond – at least, in the short term.
“Spreads may decline even further but the rise in Treasury rates will make it difficult for mortgage rates to fall much more over the next few weeks,” Khater said.
While the 30-year rate rose, the less-popular 15-year average fixed rate set a new low at 2.42%. That’s down from 2.46% last week and breaks the record low of 2.44% set in the first week of August.
Despite this week’s bump in the 30-year average rate, the long-term trend shows it heading down through next year, according to a Fannie Mae forecast last month.
The average 30-year rate probably will be 2.7% next year, down from 3.1% in 2020. Both would be record lows.
Low rates likely will boost mortgage lending to $3.4 trillion this year, which would be the highest since 2003, the Fannie Mae forecast said.
That would be a $1 trillion increase over last year.