Mortgage interest rates hit a new low again. Why they could rise this year.

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Mortgage rates hit another all-time low this week, according to Freddie Mac, but don’t expect ultra-low interest rates to last forever.

The average fixed mortgage rate for 30 years was 2.65% for the week ending January 7, 2021, a new low according to the company’s weekly mortgage interest rates. In a press release, Sam Khater, the firm’s chief economist, said recent low rates have been offset by rising home prices, challenging home affordability.

Housing affordability emerged as a concern in the second half of 2020, when economists warned that soaring prices made it more difficult for some potential buyers to enter the market, even at historically low mortgage rates. High buyer demand, likely driven in part by shifts due to the pandemic, as well as historically low interest rates and changing demographics, and a low supply of homes for sale have contributed to prices rising fastest in October years. the last month for which Case-Shiller index data is available.

But further pressure on housing affordability could come as mortgage rates rise, Khater wrote in the press release. The economist said he expects rates to rise modestly in 2021 as the economy recovers from the Covid-19 pandemic and vaccinations begin to work, Khater wrote in an email. Barron’s. While Khater noted that a rise in rates is dependent on vaccine distribution, he said rates are likely to increase slowly, with the largest increase in the second half of the year.

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