Courtesy Adobe Stock Jakub Jirsak

Buyers are experiencing an unprecedented run of low mortgage rates, making it easier to borrow money to make a home purchase a reality. According to experts, those rates will continue into the future. What will that mean for future demand? In this podcast and article from Knowledge@Wharton, Wharton's Benjamin Keys and Guy Cecala of Inside Mortgage Finance share their thoughts.

Is it time to cheer for aspiring home buyers or existing homeowners looking to refinance their home loans? Mortgage rates fell for the third consecutive week on February 21, to 4.35%, according to Freddie Mac, the government-sponsored enterprise that supports a secondary market for housing mortgages.

That dip in mortgage rates follows a general downward trend that began late last year, according to Freddie Mac. The agency buys and pools housing mortgages and sells them as mortgage-backed securities to investors in the open market. “Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months,” Freddie Mac predicted.

That optimistic outlook follows a period of tepid housing demand on the back of rising interest rates, high home prices and low availability of housing stock. Faced with reduced demand for their traditional home loans, mortgage lenders had begun trying to drum up more business by offering “unconventional mortgages,” where buyers who can’t provide the standard proof of income could still get loans. Such mortgages had been blamed for fanning the 2007 housing finance crisis, but they do not seem to pose a threat as yet to the current housing market. Uncertainty also looms over the continued role of the government in the mortgage finance industry, especially through Fannie Mae and Freddie Mac, and the prospects for greater private sector involvement.

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