Mortgage rates remain steadfastly under 3%, but some of the pent up demand for new homes seems to be waning. Or is it that prospective buyers are waiting for COVID-19 vaccines to show results? Image Credit: AP

Mortgages rates in the US have slipped to a record low for the 16th time this year. The average for a 30-year fixed loan fell to 2.66 per cent, down from 2.67 per cent last week and the lowest in data going back almost 50 years, Freddie Mac said in a statement.

The cheaper borrowing costs have fueled a housing rally that's boosted the broader economy during the pandemic. But the real estate market cooled a bit in November, and with coronavirus cases surging, there is concern about how long the rally can last.

"The housing market is poised to finish the year strong as low mortgage rates continue to fuel homebuyer demand," said Sam Khater, chief economist at Freddie Mac. "Moving into 2021, we expect rates to hold steady ,but the key driver in the near term will be the trajectory of the pandemic and the execution of the vaccine."

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Staying under

Mortgage rates, which started tumbling in March when the coronavirus roiled financial markets, have been below 3 per cent since July. The lower rates, combined with demand for more space to ride out the pandemic, have pushed buyers into the market. Current owners have also been able to save money by refinancing their loans.

A low inventory of homes to buy, combined with the surging demand, has driven up prices. That's raised concerns that the housing boom will run out of steam, particularly if rates start to tick up.

November blues

New-home sales in the US tumbled to a five-month low in November, dropping 11 per cent in a sign the market is cooling off as coronavirus cases surge. Sales of previously owned homes were also down last month, slipping for the first time in six months. That came as the median selling price jumped 14.6 per cent, the fourth straight month of double-digit increases.

"The slight decline in rates this week doesn't change the big picture much for either homeowners or homebuyers," said Keith Gumbinger, vice-president at HSH.com, a mortgage and consumer loan information company. "With quiet financial markets and little new economic data out there's little reason to expect any more movement in mortgage rates than we've seen of late."