Mortgage rates hit a new low. Why they might increase this year.

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

The 30-year average fixed mortgage rate was 2.65% for the week ending Jan. 7, 2021, a new low, according to the company’s weekly mortgage rate survey. In a statement, Sam Khater, the company’s chief economist, said recent low rates had been offset by rising house prices, putting the affordability of homes into question.

Housing affordability emerged as a concern in the second half of 2020, as economists warned that rapidly rising prices made it more difficult for some potential buyers to enter the market, even against a backdrop of historically mortgage rates. low. Strong demand from buyers, likely due in part to changes brought on by the pandemic, along with historically low interest rates and demographic shifts, and a low supply of homes for sale have helped prices rise at the fastest pace. fast for years in October, the last month for which Case-Shiller index data is available.

But additional pressure on housing affordability could come with rising mortgage rates, Khater wrote in the statement. The economist said he expects rates to increase slightly throughout 2021 as the economy recovers from the Covid-19 pandemic and vaccinations begin to take effect, Khater wrote in an e-mail to Barron’s. While Khater noted that an increase in rates depends on the distribution of vaccines, he said rates would likely increase slowly, with the biggest increase in the second half of the year.

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