30-Year Rates Are at an 18-Month Low

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Mortgage rates declined, keeping borrowing costs at the lowest levels since May 2013.

The average rate for a 30-year fixed mortgage was 3.8%, down from 3.93% last week, Freddie Mac said in a statement today. The average 15-year rate dropped to 3.09% from 3.2%, the McLean, Va.-based mortgage-finance company said.

Housing demand has been restrained by tight credit and sluggish wage growth, even as low borrowing costs make purchases more affordable. Federal Reserve Chair Janet Yellen has set continued improvement in the labor market as a key requirement for raising interest rates at some point next year. Yesterday she said the central bank is likely to hold rates near zero at least through the first quarter.

Mortgage rates have moved “from low levels to lower levels,” Paul Diggle, U.S. property economist for Capital Economics Ltd. in London, said in a telephone interview on Dec. 16. “The bigger picture is that rates are set to rise from here. We might be at the lowest point around now. I think we’re going to have an increase in mortgage rates next year.”

The 30-year average is the lowest since May 23, 2013, when it was 3.59%, according to Freddie Mac. The rate will climb to 4.725% by the end of next year, according to the median estimate in a Bloomberg survey.

The housing market will resume its recovery in 2015 as sales accelerate, construction increases and lending standards ease, according to the survey of 25 economists and analysts. New-home sales will jump 16% to 510,000 and purchases of existing homes will climb 5% to 5.21 million, according to the median estimates.

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