The average U.S. rate for a 30-year fixed mortgage dropped to within one basis point of an all-time low this week, according to Freddie Mac.
The rate fell to 3.24% from 3.28% last week, close to the 3.23% all-time low reached in April’s final week, according to the report.
The low rates are spurring housing demand as states ease lockdown restrictions, said Sam Khater, Freddie Mac’s chief economist.
“As states reopen, we’re seeing purchase demand improve remarkably fast, now essentially flat relative to a year ago,” Khater said.
The trend for mortgage rates is downward, according to major forecasters. Fannie Mae projected last week the average this quarter would be 3.2%, followed by 3.1% in the third quarter and 3% in the fourth quarter.
Fannie Mae is forecasting an average of 2.9% for every quarter of 2021.
“The low-interest-rate environment is expected to persist for the remainder of the year, with mortgage rates potentially falling below 3% by the start of 2021, which, combined with our expectation of a recovery in employment, should support housing activity,” the Fannie Mae forecast said.
That probably will push refinancing volume to a 17-year high, according to the forecast. Lenders likely will originate $1.5 trillion in refis in 2020, a 51% jump from 2019, according to the forecast. That would be the highest level since 2003 when $2.5 trillion of mortgages were refinanced, according to data from the Mortgage Bankers Association.
The purchase market is likely to be more sedated as home sales in 2020 drop 15% because of job layoffs and economic contraction, the forecast said. Mortgage lending for home purchases probably will decrease to $1.1 trillion this year from $1.3 trillion last year, the forecast said.
Freddie Mac’s report also included changes in the average rate for two other types of home loans on Thursday. The average 15-year fixed rate averaged 2.7%, down from 2.72% last week.
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.17%, down from last week’s rate of 3.18%.