Mortgage rates hold steady, but economists say don’t expect that to last

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Mortgage rates didn’t budge much over the last week amid mixed signals as to the economy’s strength as the holiday season kicked into full drive.

The 30-year fixed-rate mortgage averaged 3.68% during the week ending Dec. 5, unchanged from the previous week, Freddie Mac FMCC, +2.40%  reported Thursday.

Compared to a year ago, mortgage rates were more than a full percentage point lower. During this same week last year, the 30-year fixed-rate mortgage averaged 4.75%.

The 15-year fixed-rate mortgage dropped one basis point from the previous week to an average of 3.14%, according to Freddie Mac. The 5/1 adjustable-rate mortgage averaged 3.39%, falling four basis points from a week ago.

Home buyers today are particularly rate-sensitive given the high cost of homes across the country. When rates increased at the beginning of 2019, home-buying activity decreased substantially. But this summer’s drop in rates helped spur an uptick in activity in the housing market, including both sales and home construction.

The trajectory of mortgage rates will largely dictate whether the good times keep rolling for the housing market in the New Year. Economists have projected that rates will stay below 4% next year. has forecast rates to hit 3.88% by year’s end in 2020, while Fannie Mae’s latest projections show rates dropping to 3.5% in the fourth quarter of 2020. But these forecasts could be off the mark. This time last year, for instance, Fannie Mae projected that mortgage rates would reach 5% in the fourth quarter of 2019.

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“This week the economy sent mixed signals, leaving mortgage rates unchanged,” Sam Khater, Freddie Mac’s chief economist, said in the latest report released Thursday. “Survey data for manufacturing and service industries varied while construction spending fell modestly. However, home-buyer demand continued to improve, rising 8%.”

Mortgage rates generally track the direction of the 10-year Treasury note TMUBMUSD10Y, +1.07%. The 10-year Treasury yield has seesawed over the last week, on the heels of that same economic data.

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