Getting a mortgage to buy a home won’t cost you much in interest — at least from a historical perspective. But would-be home buyers may be hamstrung when they look to take advantage of the low-rate environment.
The 30-year fixed-rate mortgage averaged 3.73% for the week ending Dec. 19, Freddie FMCC, +0.00% reported Thursday. That’s the same as one week ago, but significantly lower than this time last year when the average fixed-rate for a 30-year loan was 4.55%.
Similarly, the average rate for a 15-year fixed-rate mortgage remained the same on a weekly basis at 3.19%. 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.37 percent — up one basis point from last week.
Mortgage rates generally track the direction of the 10-year Treasury note TMUBMUSD10Y, +0.00% , the yield on which has risen since the weekend.
“Mortgage rates had a volatile few days following notable developments in both the ongoing Brexit and China trade pact discussions, but ultimately finished the week largely in line with where they began,” Zillow ZG, -2.00% economist Matthew Speakman said ahead of Thursday’s data release. “The fact that mortgage rates haven’t taken off like a rocket in response to either or both of these developments speaks to the complexity of the two situations and the remaining work needed on both fronts.”
The decline in mortgage rates late this summer improved the affordability of buying a home for millions of Americans. That has raised the prospects of home-building and boosted optimism in the housing industry.
Many Americans feel newly empowered to purchase a home because the size of their mortgage payments would be smaller now that they would have been if they had sealed the deal a year ago. But home sales haven’t increased across the board.
In fact, existing-home sales declined in November for one main reason: Inventory. The supply of homes for sale is extremely low. As a result, it’s become very difficult for many people to simply find a home that is available for sale.
Making matters worse, the tight supply coupled with the high demand fueled by low mortgage rates has pushed sales prices higher. Over time, that could push some buyers to the sidelines of the housing market when they just received the gift of cheaper interest.
“While the economy is in a sweet spot, improvements in housing market sales volumes will be modest heading into next year simply due to the lack of available inventory,” said Sam Khater, Freddie Mac’s chief economist.