Interest rates on home loans by and large remained unchanged over this last week and will close out 2019 much lower than they were at the year’s beginning.
The 30-year fixed-rate mortgage averaged 3.74% during the week ending Dec. 26, up one basis point from the previous week, Freddie Mac FMCC, -1.00% reported Thursday.
Similarly, the 15-year fixed-rate mortgage held steady at 3.19%, according to Freddie Mac. The 5/1 adjustable-rate mortgage stood out this week, rising eight basis points to an average of 3.45%.
Mortgage rates roughly follow the direction of the 10-year Treasury note TMUBMUSD10Y, +0.00% , which was bolstered over the past week by positive economic data including strong home-building activity and consumer spending.
Overall, mortgage rates averaged 3.9% this year, which was the fourth lowest annual average level since 1971, Sam Khater, Freddie Mac’s chief economist, said in the report.
“Heading into 2020, low mortgage rates and the improving economy will be the major drivers of the housing market with steady increases in home sales, construction and home prices,” Khater said.
Most economists expect that 2020 will present a continuation of the low-rate environment that has dominated this year. Economists predicted that the 30-year fixed-rate mortgage will average between 3.60% and 3.85% next year, which could even represent a slight decrease from its current levels.
But the low-rate environment won’t necessarily mean that buying a home will be a cheap proposition. Low interest rates allow for home prices to rise more steadily, so affordability concerns are expected to persist.
“While the outlook for the housing market is bright, worsening housing affordability is no longer a coastal phenomenon and is spreading to many interior markets and it is a threat to the continued recovery in housing and the economy,” Khater said.