The average interest rate on a 30-year fixed-rate mortgage fell to an all-time low of 2.88% last week, according to Freddie Mac. This is the lowest level in nearly 50 years of the mortgage giant’s investigation. The 15-year fixed rate mortgage fell to 2.44%.
The low rates give potential home buyers more purchasing power and are expected to bolster demand in the real estate market, said Freddie Mac.
“We expect rates to stay low and continue to propel the buying market forward,” said Sam Khater, chief economist at Freddie Mac. “However, the main obstacle to increasing demand remains the lack of inventory, especially for entry-level homes. ”
The number of homes for sale has fallen to some of the lowest levels on record, said George Ratiu, senior economist at Realtor.com. This has led to a frantic environment of multiple bids, price escalation clauses and inspection waivers.
“At this rate, tighter lending standards and low inventories will weigh on real estate activity and we will see a substantial slowdown in sales in the second half of this year,” he said.
Although refinancing and buying requests declined last week, both are significantly higher than a year ago, according to the Mortgage Bankers Association. Refinances are up 84% from last year and purchase requests are 22% higher than last year.
The MBA expects rates to stay at these low levels, spurring strong refinancing activity and providing homeowners with some relief during this uncertain economic time with lower monthly mortgage payments, said Joel Kan, vice president MBA associate in economic and industrial forecasting.
But he noted that loan balances were increasing.
“Purchase loan balances have continued to climb, possibly a sign that the still weak job market and the credit crunch for government loans are straining some first-time homebuyers. “