In 2020, 30-year fixed mortgage rates started the year at historically low levels. Rates fell below 3.0% for the first time as COVID-19 took its toll on the economy. What does the future hold? Can we expect interest rates to rise or fall in 2021?
Mortgage Rate Forecast
According to an average of forecasts from Fannie Mae, Freddie Mac, the National Association of Realtors, and the Mortgage Bankers Association, the 30-year mortgage rate is predicted to average 3.075% in 2021. This rate is down from the average rate of 3.125% in 2020. However, the Mortgage Bankers Association (MBA) predicts that mortgage rates will rise to an average rate of 3.3% in 2021, while the other three state rates will fall or stay the same. The MBA bases this prediction on a recovering economy and high federal budget deficits, which push interest rates higher.
Another factor is keeping rates lower in the Federal Reserve. The Fed has committed to keeping interest rates low through at least 2022. While Fed rates and mortgage rates are not the same, a fall in Fed rates tends to drive all interest rates lower.
Keep in mind, predictions can be wrong and some factors could drive mortgage rates upwards. If the available housing supply increases and more people apply for mortgages, the higher demand could cause a rise in mortgage rates. Additionally, if government borrowing continues it could generate greater competition for loans, which can cause a rise in rates.
2020: Year of the Happy Homeowner
It wasn’t only homebuyers that took advantage of reduced mortgage rates; homeowners looking to refinance jumped in on the action as well. As the rate hit record lows multiple times in 2020, homeowners refinanced to exchange their higher interest rates for lower ones. Lower rates mean lower monthly payments and less interest paid over the life of the loan – a definite plus in today’s recovering economy.
If you’re thinking of refinancing, act quickly. Beginning on December 1, 2020, an Adverse Market Refinance Fee will be imposed on most refinances. Borrowers can expect a 0.5% fee added to their mortgage loan. The fee isn’t paid by the homeowners at closing; lenders can add 0.125% to 0.25% to your interest rate to cover their costs.
Historical Perspective
For prospective homebuyers, it’s a great time to act and purchase a home. Favorable mortgage rates will probably be available well into 2021 and perhaps longer. Even if and 2021 mortgage rates rise a bit, by historical standards they’ll still be low. In the first decade of this century, rates averaged between 5%-6%, and rates below 5% have been around since 2011. If you take out or refinance a mortgage this year or next, you’ll likely be happy with your interest rate for the life of your loan.
Looking to make a decision about a mortgage or refinancing? Trust the experienced professionals at Pacor Mortgage, We can answer your questions and help you take advantage of today’s great mortgage rates. Give us a call today at 773-881-7744 to set up an appointment, or visit our website to learn more about our products and programs.
2020 Pacor Mortgage Corp. Pacor Mortgage Corp is located at 14930 Cicero Ave, Oak Forest, IL 60452, Phone 773-881-7744 (Unique Identifier #120945). For Licensing information, go to: www.nmlsconsumeraccess.org. Pacor Mortgage Corp is an equal housing lender and is licensed by the Secretary of State under the Illinois Residential Mortgage Lending Act and is assigned Illinois Residential Mortgage License MB.0000892. Pacor Mortgage Corp branches operate with the following licenses and is assigned Illinois Residential Mortgage License MB.0000892-001, with a Wisconsin License # 260345BA, Palos Heights NMLS 261297 and is assigned Illinois Residential Mortgage License MB.0000892-008, Colorado, Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, California license # 41DBO-67516, Florida MLD1075, Indiana DFI 13177, Maryland 23528, Michigan FL0828, Michigan SR1130, Minnesota MN-MO-120945, North Carolina L-184546, Ohio RM.804151.000, Pennsylvania 43855, South Carolina, MLS – 120945, Wisconsin 120945BA, Kalamazoo, MI NMLS 120945 also DBA Lake Pacor Home Mortgage. This is not an offer for an extension of credit, a rate lock or a commitment to lend. All loans must satisfy company underwriting guidelines and any investor overlays. Any of the advertised products may be discontinued at any time. Information and pricing are subject to change at any time and without notice. Loans are being committed and closed at expressed rates although these rates change and may not be available at time of your lock in, commitment and / or closing. Pacor Mortgage Corp is not affiliated with your current lender, nor is it an agency or extension of the Federal Government, Fannie Mae, Freddie Mac or HUD.