Can the housing mortgage interest rates go even lower?

Mortgage rates ticked up, after falling to yet another record low last week for the 11th time since the beginning of the year. Specifically, the 30-year fixed-rate mortgage rose slightly to an average of 2.81% from 2.80% the previous week.

The news comes after the Department of Commerce released the new GDP report earlier this morning, with GDP rising tremendously by 33% in Q3 2020 compared to the previous quarter. The United States certainly experienced its fastest three months of economic growth on record. Additionally, the housing market is one of the sectors that significantly contributed to the recovery of the economy.

First of all, with these ultra-low mortgage rates, homebuying activity has increased by nearly 70% compared to May spurring homebuilding and many durable consumer goods industries. In the meantime, based on another important indicator, the homeownership rate rose by 2.6% in Q3 2020 compared to a year earlier with African Americans experiencing the largest gains followed by Hispanics. Thus, more people from minority groups are able to become homeowners than pre-pandemic.

Meanwhile, there is clearly a strong consumer interest in remodeling with the remodeling market booming during the pandemic. While homeowners spend a considerable amount of time at home, they realize what they actually need to update and reconfigure in indoor and outdoor spaces for the “new norm” of telework and virtual learning. According to NAR, 2 in 3 owners have already remodeled their homes or have thought about it. While these ultra-low mortgage rates lower borrowing costs, more homeowners are expected to do major renovations this year and next.

With mortgage rates hovering near record lows, expect real estate to continue to stay strong, boosting economic growth.

Central bank affirms commitment to provide more support amid uneven recovery

Federal Reserve officials projected no plans to raise interest rates through 2023 and said they were committed to providing more support to an economy that faces an uneven recovery from the coronavirus pandemic.

In new projections released Wednesday, all 17 officials said they expect to keep rates near zero at least through next year, and 13 projected rates would stay there through 2023.

The Fed revised its post-meeting statement to deliver more specifics about the conditions that would warrant keeping interest rates near zero. Two officials dissented from the new statement.

The Fed said it would maintain rates near zero “until labor market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time.”

The Fed’s two-day policy meeting that concluded Wednesday is the first since officials last month announced a new framework that abandoned the central bank’s longtime strategy of pre-emptively lifting interest rates to head off higher inflation.