Will Mortgage Rates Remain Low in 2021?
Will Mortgage Rates Remain Low as We Enter the New Year?
Haymarket Homeowner | December 2020
by Stacey Barowich
Market Leader, Movement Mortgage
Email: [email protected]
One good thing that came out of 2020 was the continued drop in mortgage rates. In the Haymarket area, and in many parts of the country, 2020 has been a seller’s market. Inventory low, demand high and interest rates at record low rates. For buyers, the only problem has been finding the right home in a competitive market.
That said, it is still a good time for buyers as interest rates will likely rise in 2021. It is also a good time to refinance if you are not planning on selling anytime soon. Here is a what we saw in 2020 and what experts predict may happen in 2021:
In 2020, buyers got a big boost in the housing market as mortgage rates dropped throughout the year. According to Freddie Mac, rates hit all-time lows 12 times this year, dipping below 3% for the first time ever while making buying a home more and more attractive as the year progressed (See graph below):
When you continually hear how rates are hitting record lows, you may be wondering: Are they going to keep falling? Should I wait until they get even lower?
The Challenge with Waiting
The challenge with waiting is that you can easily miss this optimal window of time and then end up paying more in the long run. Recently, mortgage rates ticked up slightly. Sam Khater, Chief Economist at Freddie Mac, explains:
“Mortgage rates jumped this week as a result of positive news about a COVID-19 vaccine. Despite this rise, mortgage rates remain about a percentage point below a year ago.”
While rates are still lower today than they were one year ago, as the economy continues to get stronger and the pandemic is resolved, there’s a very good chance interest rates will rise again.
Several top institutions in the real estate industry are projecting an increase in mortgage rates over the next four quarters (See chart below):
If you’re planning to wait until next year or later, Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), forecasts mortgage rates will begin to steadily rise:
As a buyer, you need to decide if waiting makes financial sense for you.
The Bottom Line
If you’re planning to buy a home and want to take advantage of today’s low rates, now is the time to do so. Don’t assume they’re going to stay this low forever.
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