One of the top questions that is presented to our Agency this year is – “Will the mortgage interest rate increase in 2021?” Last year was an insane year and to be honest there are many components to answering that question. Some of the key elements that professionals/experts refer to are: · Federal Reserve rates · Bond Rates · Positive or negative response to COVID 19 Vaccination · The overall economy response It is truly a mixed bag of elements that could have a positive or negative effect on the direction of the mortgage interest rate. The majority of the experts expect the rates to remain low or possible a slight increase. Check out the what the experts are saying in an article written by Jason Stauffer from the NextAdvisor newsletter. Lawrence Yun, Chief Economist with the National Association of Realtors Yun believes that mortgage rates will remain stable in 2021 — with the potential for a slight increase from the all-time low of 2.71% we saw in 2020 for 30-year, fixed rate mortgages. “In 2021, I think rates will be similar or modestly higher, maybe 3%” he says. “So mortgage rates will continue to be historically favorable.” Yun thinks the Federal Reserve’s actions are critical to the direction mortgages rates will go. “The Federal Reserve has indicated they want to pursue this low interest rate policy for a long period, over the next two or three years, “he says. While the Federal Reserve doesn’t directly control mortgage rates, Yun agrees with the conventional wisdom that its actions will indirectly impact rates — and can help keep them low in 2021. Danielle Hale, Chief Economist at Realtor.com Hale sees low rates continuing through the first half of 2021. “Making any kind of prediction for next year is difficult. But our expectation is that mortgage rates start the year roughly in line with where they are now, and they stay fairly low — right around 3% — for the first half of the year,” Hale says. She believes that in the second half of 2021, if access to a vaccine helps to improve the economy, rates could rise. “Mortgage rates could approach 3.4% by the end of the year,” she says. While Hale expects rates to stay low compared to historical averages, we could see a relatively drastic shift in rates. “We’re at such low levels that 3.4% will be a significant increase — that’s 70 basis points above where we are now,” Hale says. “Homebuyers will notice it when they’re calculating their monthly mortgage payment.” This increase in mortgage rates could slow down the demand for housing in the later part of next year. Freddie Mac The Federal Home Loan Mortgage Corporation, is a public government-sponsored enterprise – Believes, “The average 30-year fixed-rate mortgage hit a record low over a dozen times in 2020 and the low interest rate environment is projected to continue through this year. We expect interest rates to average below 3% through the end of 2021. While this is a modest rise from 2020 averages, the recent vote by the Federal Reserve to keep interest rates anchored near zero should keep rates low.” Keep Current Matters Here is an article I found in KCM – Buyers should take advantage of the low interest rates. “Low mortgage rates are creating an outstanding opportunity for current homebuyers to get more for their money while staying within their budget. As the economy gets stronger and we recover from the challenges of 2020, it’s natural for rates to potentially rise in response to a healthier economy. With low rates fueling activity among hopeful buyers, there are a lot of people who are highly motivated and looking for homes to purchase right now. In this environment, it can be challenging to find a home to buy, so a local real estate agent will be key to your success if you’re thinking of buying too. Working with a trusted real estate professional to navigate the process while rates are in your favor might be the best move you can make.” Final Say This is still a wonderful time for a buyer to purchase a home. This is the is time before interest climb. Give us a call here at Alliance Associates Realtors and let’s talk.
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