The record low average 30-year mortgage rate seen this week may not be sustained, but current economic and market conditions point to 30-year rates below 5% "for some time," according to a new Freddie Mac forecast.
The average rate for a 30-year FRM inched down during the week ending July 22, returning to a record low of 4.56% from 4.57% the week before. A year ago the rate was 5.20%.
A combination of the Federal Reserve's commitment to low interest rates for the "near future" (roughly 12 to 18 months) combined with a flight to quality into government and agency bonds are expected to sustain low rates, Freddie Mac deputy chief economist Amy Crews Cutts told National Mortgage News.
One risk to the Fed's commitment to low rates would be inflation, but she said this is "unimaginable" given the current economic situation, unless there was an extraordinary event such as an oil embargo. The flight to quality is driven by the European debt crisis and while the worst of this appears to be over, the Freddie economist said it's likely to continue exerting downward pressure on rates because "weakness and worry" persist.
The average rate on a 15-year loan fell to 4.03% from 4.06% the previous week. A year ago the rate was 4.68%. One-year Treasury ARMs were being offered at 3.70%, compared to 4.77% a year ago.
