Mortgage interest rates remain low as house prices continue to rise

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In the middle of the year, the trend towards low rates did not change, even declining several times over the past month. Rates on 30-year fixed-rate loans hit 2.8% this week, according to Freddie Mac. This is all close to the all-time low of about 2.65%, which they reached in January this year.

Although the 30-year loan has yet to hit a new low, the 15-year mortgage this week hit its lowest level ever at 2.1%. A year and a half ago, experts were shocked that rates on 30-year mortgages fell to less than 3%, and no one thought that 15-year loans would fall below 2%. But here we are on the verge of what is happening.

This low rate has led to a sharp increase in refinancing applications. They were up 9% from a week earlier, according to the Mortgage Bankers Association’s weekly refinancing index. But compared to last year, refinancing was 10% less. They still account for about 67% of mortgage activity, so demand remains strong from homeowners looking to save on their loans.

For bids, the index continues to decline, reflecting the rise in house prices taking place in most of the country. The Federal Housing Finance Administration reported a 18% rise in house prices in May over the same period last year. The Core-Logic Case-Shiller Home Price Index confirmed the same trend, adding that the spike in May exceeded the April rise in prices by 15%. According to Core Logic, May’s growth was the largest since 2004 compared to 2004.

Housing demand has not declined, but purchasing power has declined. While interest rates will remain low, their impact on prices will continue to drive up the cost of buying a home, leading to a slowdown in buying activity that we will likely see before the end of the year.

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