The 30-year fixed mortgage rate, the most popular loan product, sank to its lowest level on record this week, marking the 17th historic low it has hit in less than a year. But rates may have hit bottom as many experts predict them to rise in the coming year.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average sank to 2.65% with an average 0.7 point.  

The 30-year fixed rate has never been this low since Freddie Mac began tracking mortgage rates in 1971. It surpassed the previous low of 2.66% set last month. Since the start of 2020, the 30-year rate has fallen more than a percentage point, going from 3.72% to 2.65% this week.

Freddie Mac, the federally chartered mortgage investor, aggregates rates from around 80 lenders across the country to come up with weekly national average mortgage rates. It uses rates for high-quality borrowers with strong credit scores and large down payments. These rates are not available to every borrower.

Because the survey is based on home purchase mortgages, rates for refinances may be different. This is especially true since the price adjustment for refinance transactions went into effect earlier this month. The adjustment is 0.5% of the loan amount (e.g., it is $1,500 on a $300,000 loan) and applies to all Fannie Mae and Freddie Mac refinances.

The 15-year fixed-rate average dipped to 2.16% with an average 0.6 point. It was 2.17% a week ago and 3.07% a year ago. The five-year adjustable rate average rose to 2.75% with an average 0.3 point. It was 3.71% a week ago and 3.3% a year ago.

"A new year, a new record low mortgage rate," Sam Khater, Freddie Mac's chief economist, said in a statement. "The forces behind the drop in rates have been shifting over the last few months and rates are poised to rise modestly this year. The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential homebuyers during the spring home sales season."

On Wednesday, the yield on the 10-year Treasury climbed above 1% for the first time since last spring, closing the day at 1.04%. Yields move inversely from prices. When prices fall, yields rise.

The bond market sell-off was in part a reaction to the outcome of the Senate races in Georgia. With Democrats expected to have a slim majority in Congress, many investors are expecting more economic stimulus. Increased government spending usually means more government borrowing and a bigger supply of bonds, which typically sends yields higher.

"The future outlook for mortgage rates remains uncertain this week amid a changing landscape in Washington," said Danielle Hale, chief economist at Realtor.com. "On Wednesday, the 10-year Treasury moved above 1% for the first time since March, as the outcome of the Georgia Senate race seemed to indicate the possibility of less gridlock, making another stimulus a more realistic possibility. However, markets have yet to react to developing events at the U.S. Capitol, which could create uncertainty that dampens long-term rates."

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