Borrowing costs this year likely will be lower than originally predicted. Freddie Mac recently downgraded its forecast for the 30-year fixed-rate mortgage, projecting it will average 4.3% this year—below last year’s average of 4.5%. Further, Freddie economists predict only a small increase in rates in 2020, with the 30-year fixed-rate mortgage averaging 4.5% next year.
The lower mortgage rates likely will be a boon for housing, Freddie Mac notes in its May 2019 Forecast. “The combined positive impact of low mortgage rates, a strong labor market, low unemployment, and modest wage growth supports our forecast for a steadily growing housing market in 2019,” Freddie Mac says in its report.
The declining interest rates are expected to help reverse a decrease in mortgage originations that occurred in 2018. Freddie Mac researchers note this will “continue to provide an impetus to first-time home buyers as well as homeowners looking to refinance.”
Freddie Mac projects that home sales will surpass 2018 levels and reach 5.98 million units in 2019. Most of the increase will come from existing-home sales. Freddie Mac’s forecast remains flat for housing starts this year, however, at 1.26 million units.