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Average U.S. Mortgage Rate Dips Below 3% Again, Freddie Mac Says

House and wooden cube percent interest rate sign on scale

The average U.S. rate for a 30-year fixed mortgage fell to 2.97% this week, the first time in two months it dropped below 3%, Freddie Mac said in a Thursday report.

The rate declined from 3.04% last week, making it the third consecutive retreat since reaching a 10-month high at the beginning of April, Freddie Mac said.

The average U.S. fixed rate for a 15-year home loan fell to 2.29% this week from 2.35%, the mortgage financier said.

Mortgage rates fell as bond investors worried about a resurgence of the Covid-19 pandemic that would delay an economic resurgence. Investors typically weigh the outlook for inflation when deciding what returns they are willing to accept for bonds backed by home loans, and when prospects for growth are bleaker, rates tend to fall because inflation will be muted.

New Covid-19 infections are surging around the world, fueled by mutations that make the virus easier to catch, the World Health Organization said on Monday. In the U.S., the seven-day average of new infections was 63,057 on Wednesday, up 16% from a month earlier, and younger people accounted for more hospitalizations, according to the Centers for Disease Control and Prevention.

The longterm prospects for mortgage rates is higher, helped by an aggressive vaccination drive in the U.S. that will bolster econmic growth. But, forecasters don't expect rates above 4% in the next few years.

The average U.S. rate for a 30-year fixed mortgage probably will be 3.2% this quarter, compared with 2.9% in the first three months of the year, according to a Freddie Mac rate forecast issued last week. By the fourth quarter, rates likely will average 3.4%, the forecast said.

For now, the retreat in the average rate give homebuyers a chance to lock in a sub-3% financing, said Sam Khater, Freddie Mac’s chief economist.

“The drop in mortgage rates is good news for homeowners who are still looking to take advantage of the very low rate environment,” Khater said.

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