(Bloomberg) — US mortgage rates climbed slightly, holding close to the record lows that have spurred a boom in home purchases.
The average for a 30-year, fixed loan was 2.87 percent, up from 2.86 percent last week, which was the lowest in almost 50 years of data-keeping, Freddie Mac said in a statement Thursday. The rate has held below 3 percent since late July, a slide in borrowing costs that started in March as fears of the coronavirus drove investors to the safety of Treasuries.
Cheap loans have fueled sales of both new and existing homes, making real estate a bright spot in the pandemic economy. The Federal Reserve signaled on Wednesday that it would hold its benchmark lending rate near zero through at least 2023, which should keep a lid on borrowing costs for consumers.
The decline in mortgage rates has given buyers more purchasing power — especially at the less-pricey end of the market, where demand has been strongest.
“In August, first-time home buyer activity rose 19 percent from July to the highest monthly level ever for Freddie Mac,” Sam Khater, the company’s chief economist, said in the statement. The rebound “has come at a critical time for the economy.”
Low rates have also allowed many Americans to reduce their monthly payments. Still, more can take advantage: More than 19 million homeowners are likely to benefit from refinancing, because they have good credit, at least 20 percent equity in their homes, and can cut their rates by at least 0.75 percent, Black Knight Inc. said last week. The average savings would be $299 a month, according to the industry-tracking firm.