New Year, New Record Low for Mortgage Rates

The average interest rate for a home loan has fallen a full percentage point over the past year.

© Freddie Mac

Mortgage rates started the year with a new record low. The 30-year fixed-rate mortgage dropped to a 2.65% average this week, the lowest since Freddie Mac began tracking such records more than 50 years ago.

“Despite a full percentage point decline in rates over the past year, housing affordability has decreased because these low rates have been offset by rising home prices,” says Sam Khater, Freddie Mac’s chief economist. “However, the forces behind the drop in rates have been shifting over the last few months, and rates are poised to rise modestly this year.” That could prompt a decline in housing affordability and squeeze home buyers during the spring selling season, Khater cautions.

The National Association of REALTORS® has forecasted mortgage rates to average 3.1% in 2021.

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 7:

  • 30-year fixed-rate mortgages: averaged 2.65%, with an average 0.7 point, dropping from last week’s 2.67% average. Last year at this time, 30-year rates averaged 3.64%.
  • 15-year fixed-rate mortgages: averaged 2.16%, with an average 0.6 point, falling slightly from last week’s 2.17% average. A year ago, 15-year rates averaged 3.07%.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.75%, with an average 0.3 point, rising from last week’s 2.71% average. A year ago, 5-year ARMs averaged 3.30%.

Freddie Mac reports average points, along with average commitment rates, to better reflect the total upfront cost of obtaining a mortgage.

Source: Freddie Mac and National Association of REALTORS® Economists’ Outlook blog