The average U.S. rate for a 30-year fixed mortgage rose three basis points to 3.21% this week, not far from the 3.15% all-time low set at the end of May.
The average rate increased from 3.18% in the prior week, and was the third-lowest ever recorded, according to Freddie Mac data released on Thursday.
Cheap financing has boosted demand for homes as Americans emerge from lockdowns ordered by states in mid-March to combat the spread of COVID-19. A seasonally adjusted index measuring mortgage applications to fund home purchases last week rose to its highest level since January, the Mortgage Bankers Association said in a Wednesday report.
“The rebound in homebuyer demand continued this week, driven by mortgage rates that hover near record lows,” said Sam Khater, Freddie Mac’s chief economist. “This turnaround in demand, particularly by those who have higher incomes than the typical household, also reflects deferred sales from the spring.”
The index measuring purchase applications increased for the eighth straight week, MBA said in its report. On an unadjusted basis, it was 13% higher than a year ago.
Even with the pent-up demand from buyers who were stuck at home during April and May, existing home sales likely will fall 11% this year and rebound by the same amount in 2021, according to the National Association of Realtors’ June forecast.
That will put annual sales back on par with 2019, when 5.34 million sales occurred, according to NAR data.
“In the coming months, buying activity will rise as states reopen and more consumers feel comfortable about homebuying in the midst of the social distancing measures,” said Lawrence Yun, NAR’s chief economist.
Mortgage rates likely will remain low, according to his forecast. The average rate for a 30-year fixed mortgage probably will average 3.2% in 2020 and 3.1% in 2021, Yun said.