Mortgage Rates in 2021
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.
