To prevent the recession effects caused by the coronavirus, the Fed lowered the standard interest rate to boost the economy, causing mortgage rates to drop. When everyone thought the US mortgage rates had bottomed out, it fell once again and hit another record low. The question is, will the mortgage rates reach another lower record low and how long will it remain?
Chart: Mortgage rate over the past year. Source: Freddie Mac
The mortgage rate has reached a historical bottom. According to Freddie Mac, the weekly average mortgage rates were 2.88% for 30-years fixed-rate loans; 2.36% for 15-years fixed-rate loans; and 2.9% for a five-year adjustable-rate loan as recorded in October 1st, 2020. This is the lowest recorded ever in 50 years. Experts forecast that it is likely that the interest rates will drop again in the next few weeks. As a result of a downward trend in interest rates, buyers’ demand for homes soared as their purchasing power increased.
A low mortgage rate has been an advantage for homeowners and those who will buy. Existing homeowners can benefit from refinancing, which saves them parts of the loan. Homebuyers have the opportunity of getting best loans ever. Both buyers and sellers wonder about the forecast and outlook for mortgage rates for 2021, whether the rate will fluctuate around the current low range or rebound. It has a direct impact on home and mortgage buyers across the US, considering if rates will drop further and is worth the wait to reach a better deal.
For the answer, the most recent mortgage rate forecast suggests it will continue to remain as low as 3% next year. There is no guarantee that the forecast will happen, but since current rates have fluctuated at low record in the last few months, experts agree the rate will hold low for the foreseeable future. According to Sam Khater, chief economist at Freddie Mac: “While the housing market undoubtedly has felt the effects of COVID-19, we are encouraged by recent homebuyer demand as well as mortgage rates that should remain at record lows for the foreseeable future.”
The Mortgage Bankers Association (MBA) has also proposed forecasts for home loan rates for 2021. They predicted in the “Mortgage Finance Forecast” report, issuing July 15, that the average 30-years loan rates would range from 3.2-3.3% at the end of 2020, and will increase to 3.4% in the first half of 2021.
Overall, this year is a great opportunity to refinance and get a loan. So, based on the predictions, it’s a great time to come up with an effective strategy, and benefit from these rates or lose the chance of securing a mortgage at the current record low.
Author: Vy Yakushenko
Mortgage Rates (2020, October 1). Mortgage Rates Decrease. Freddie Mac. Retrieved from http://www.freddiemac.com/pmms/#
Cornett, B. (2020, July 19). Mortgage Rate Forecast for 2021: Another Year of Killer Deals? Retrieved from http://www.homebuyinginstitute.com/news/rate-forecast-for-2021-killer-deals/
Bieber, C. (2020, August 20). Mortgage interest rates forecast for rest of 2020. Foxbusiness. Retrieved from https://www.foxbusiness.com/money/mortgage-interest-rates-forecast-2020