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Mortgage Rates Fall to Another Record Low - But Home Buyers Shouldn't Cheer Just Yet

December 4th, 2020 2:22 PM by Jackie A. Graves

The Federal Reserve will likely keep mortgage rates in check for the foreseeable future.

Record-low mortgage rates aren't providing the boost they once did to home buyers, thanks to rising home prices.

Mortgage rates, yet again, fell to the lowest level on record. But the boost home buyers are seeing from low interest rates has nevertheless faded.

The 30-year fixed-rate mortgage averaged 2.71% for the week ending Dec. 3, down a basis point from the week prior, Freddie Mac FMCC, -2.90% reported Thursday. This represents the 14th record low that Freddie Mac has reported in 2020.

A year ago, the 30-year’s rate was nearly a full percentage point lower. During this same time in 2019, these loans had an average rate of 3.68%.


The 15-year fixed-rate mortgage fell two basis points to an average of 2.26%, while the 5-year Treasury-indexed hybrid adjustable-rate mortgage fell by 30 basis points to 2.86%.

The drop in mortgage rates over the past week came in spite of rising Treasury yields, including the yield on the 10-year Treasury note TMUBMUSD10Y, 0.970%.

“Treasury yields, which typically coincide with shifts in mortgage rates, rose to their highest level in three weeks on Tuesday following renewed discussions regarding more fiscal relief,” said Matthew Speakman, an economist at Zillow ZG, -0.85%. “But rather than rising with them, mortgage rates have instead held firm.”

In part, the stability in mortgage rates right now is being driven by the Federal Reserve. The central bank has continued purchasing mortgage-backed securities as part of its efforts to support the economy through the pandemic-fueled downturn. Those purchases have the result of pumping liquidity into the mortgage market, allowing lenders to make more loans at low rates. And with COVID-19 cases rising across most of the country, the economic recovery remains tenuous, providing further justification for low rates.

Unfortunately, low rates are not providing as much benefit to home buyers as they did earlier this year. “Double-digit price gains over the past three months have been chipping away at the benefit that low mortgage rates have brought,” said George Ratiu, senior economist at “For many Americans today, these low rates do not offer the same monthly savings that they did even six months ago.”


Moreover, the tight inventory of home sales will keep prices elevated and reduce buyers’ options. As a result, home sales may have “hit a wall,” as Freddie Mac’s chief economist Sam Khater put it in this week’s report.

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