Despite predictions that mortgage rates would slowly tick back up in 2021, the new year opened this week with the same old story: mortgage rates hitting a new record low. 

Sam Khater | Photo credit: Freddie Mac

The average rate for the 30-year fixed-rate mortgage fell to 2.65 percent for the week ending January 7, the lowest number ever recorded by Freddie Mac since the government-sponsored enterprise began tracking weekly rate fluctuations in 1971.

But despite the drop, housing affordability has continued to decrease.

“A new year, a new record low mortgage rate,” said Sam Khater, Freddie Mac’s chief economist, in a statement. “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.”

The forces behind plummeting rates are also starting to shift, according to Khater, so economists shouldn’t abandon the position that rates will climb in 2021 after one contrary week.

“The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential home buyers during the spring home sales season,” Khater said.

The 30-year fixed-rate mortgage averaged 2.67 percent last week and was 3.64 percent a year ago at this time, which means it’s dropped nearly an entire percentage point year over year.

The 15-year fixed-rate mortgage averaged 2.16 percent for the week ending January 7, down from 3.07 percent a year ago. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.75 percent for the week, down from last year’s average of 3.30 percent for the same week.

Mortgage purchases are still higher than this point last year, but slowing the rate of increase considerably. The unadjusted purchase index — published weekly by the Mortgage Bankers Association — was down 30 percent compared with two weeks earlier, but up 3 percent year over year for the week ending January 6.

Email Patrick Kearns

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