Average U.S. mortgage rates for a 30-year fixed mortgage fell to an all-time low of 2.88% this week, the eighth time in 2020 the weekly rate has set a record in a Freddie Mac series that goes back almost five decades.
It fell from 2.99% last week, Freddie Mac said in a report on Thursday. The average 15-year rate fell to 2.44%, the lowest in almost 30 years of data, according to the mortgage financier.
Low mortgage rates help to support real estate demand by making it possible for more buyers to qualify for loans. This is because cheaper financing lowers monthly mortgage bills, which are compared to income to qualify applicants. Low rates also support price growth because buyers typically qualify for bigger mortgages.
“Mortgage rates hit another all-time low, giving potential buyers more purchasing power and strengthening demand,” said Sam Khater, Freddie Mac’s chief economist.
The problem facing buyers isn’t the rates, Khater said. It’s the dearth of homes for sale that has plagued the housing market long before coronavirus.
In June, the inventory of homes on the market fell to a four-month supply, according to the National Association of Realtors. A year ago, the number was 4.3 months.
“We expect rates to stay low and continue to propel the purchase market forward,” Khater said. “However, the main barrier to rising demand remains the lack of inventory, especially for entry-level homes.”
Mortgage rates began tumbling in March after the Federal Reserve made a pledge to buy mortgage-backed securities and Treasuries to support demand in the bond market, which is where most U.S. home loans are packaged and sold.