Ten-year U.S. Treasury yields have drifted lower over the past couple of months, bringing mortgage rates to the lowest levels in nearly six months and well below historical levels.
The average rate for a 30-year loan was 2.77% on Aug. 5, the lowest since Feb. 11. The historically low borrowing costs, coupled with families’ need for more space to work and live, have fueled a surge in demand for housing, which remains strong more than a year into the pandemic.
Despite the low rates, loan applications for home purchases have decreased from their recent peaks in January, which is primarily because of the limited inventory of homes available.
With the Federal Reserve saying that it intends to keep interest rates close to zero for the time being, mortgage rates are expected to remain low through at least late next year. We expect that the low rates will continue to spur housing demand, despite escalating home prices.
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