Mortgage

Mortgage price forecasts for late 2021: what is going to rates of interest be?

Will mortgage rates rise in 2021?

Throughout 2021, it was agreed that higher mortgage rates will come.

But two big questions remain: When will interest rates actually rise? And how much?

We asked 10 industry experts about their mortgage rate projections to find out.

Some believe that average mortgage rates could rise to 3.5% or even 4.25% by the end of 2021. Others forecast a more modest increase to around 3.2%.

The good news is that rates today are still near historic lows. So home buyers and homeowners can conclude a lot for the time being.

Find and lock a low mortgage rate (June 22, 2021)

In this article (continue to …)

Expert predictions for mortgage rates for 2021

We asked 10 trusted real estate professionals what their projected mortgage rates would be by the end of 2021.

Their predictions ranged from 2.875% to 4.25% for a 30 year fixed rate mortgage and from 2.375% to 3.50% for a 15 year fixed rate mortgage.

These predictions can help you make better decisions before the end of the year when it comes to buying a home or refinancing.

But remember: timing the market can be a dangerous game.

If you are ready to lock a mortgage rate now, this is a good time. Prices are as low as possible for the rest of 2021.

But if you're just starting out with your home purchase or refinance, don't worry too much.

Even the forecasts of the highest mortgage interest rates for 2021 are still “low” by historical standards. So there is nothing wrong with waiting until you are ready.

Start your mortgage interest freeze here (22.06.2021)

Khari Washington, Real Estate and Mortgage Broker, 1st United Realty & Mortgage, Inc.

30-year mortgage rates until the end of 2021: 2.875%

15-year mortgage rates until the end of 2021: 2.375%

"My prediction is that rates will stay in the same range they were in, and they will likely be in a 1 percent range," says Washington.

“Interest rates will approach the upper band of current mortgage rates. The Fed's loose monetary policy will keep them in line, but the strengthened economy will place them in the upper range, ”he continues.

"If the Fed changes its interest rate position and believes inflation is rising while bond buyers are more restrictive of the economy, interest rates could rise."

Edward Mermelstein, real estate advisor, investment advisor, lawyer

30-year mortgage rates until the end of 2021: 3.2%

15-year mortgage rates until the end of 2021: 2.5%

Mermelstein explains, “My rate projections are based on historical trends as well as reported projections from Fannie Mae, Freddie Mac, and the National Association of Realtors.

“High inflation and a strong economy are the main factors likely to drive interest rates higher by the end of the year. When inflation rises, lenders will raise interest rates to make up for the loss and take over the capital they lend due to inflation.

“Also, because of the long duration of the loan, many lenders will not want to give out mortgages. Rather, they would prefer to lend short term debt until they have a better view of inflation. When it does, mortgage rates will skyrocket as there is less capital available for lending.

“If there is a strong economy, the demand will increase not only for housing, but also for capital and investments of all kinds. When the demand for mortgages rises, the interest rates rise. "

Nadia Evangelou, Senior Economist and Director of Forecasting, National Association of Realtors

30-year mortgage rates until the end of 2021: 3.2%

15-year mortgage rates until the end of 2021: 2.6%

“The economy is growing faster than expected as more Americans get vaccinated against COVID-19 and travel again, visiting restaurants, bars, events and shows. However, I don't see any major changes in mortgage rates in the near future, ”says Evangelou.

“Even if inflation could end the year above 2 percent, the Fed has made several assurances that it will allow inflation to exceed this 2 percent target without affecting its low interest rate policy.

“Employment is another important factor that also affects mortgage rates; A faster labor market tends to drive up mortgage rates and can also boost inflation, which drives mortgage rates up. "

Arman Aroutiounian, Head of Capital Markets, Reali

30-year mortgage rates until the end of 2021: 3.25%

15-year mortgage rates until the end of 2021: 2.4%

"I don't see any significant deviations – plus or minus 0.5 percent – in mortgage rates for 2021," predicts Aroutiounian.

He continues: “I would attribute any move outside of my forecast range to a rise in inflation or a slight tightening of monetary policy.

"Several other factors could affect mortgage rates by the end of the year, including a reversal of the current downtrend in COVID cases, political or global unrest, particularly in the Middle East, and a stock market correction."

Randy Hubschmidt, managing partner, Fortis Family Office

30-year mortgage rates until the end of 2021: 3.25%

15-year mortgage rates until the end of 2021: 2.625%

"I think mortgage rates will largely remain where they are until the end of 2021 – neither rise nor fall," predicts Hubschmidt.

“Homeowners worried about missing out on these low interest rates can relax to some extent. You can focus more on not paying too much for a home and waiting for the right home to come at the right price.

"Of course, if new varieties of the coronavirus strain continue to put pressure on the world's population, healthcare and the economy, we could see interest rates drop as the Federal Reserve continues to be accommodating to the broader economy rather than risking stalling." . "The restoration."

Bruce Ailion, Broker and Real Estate Attorney

30-year mortgage rates until the end of 2021: 3.35%

15-year mortgage rates until the end of 2021: 2.95%

"The strength of the economy and concerns about inflation will drive interest rates higher by the end of the year," said Bruce Ailion, real estate agent and real estate attorney.

“Note that inflation rose above the Fed's long-term target of 2.0 percent in the second quarter. Inflation expectations rose sharply in April and May, which was cause for concern. Some of this has to do with very strong demand and the scarcity of products with supply chain problems – everything from computer chips and new cars to washing machines, lumber, and building materials.

“In addition, the labor force participation rate has fallen and companies are being forced to pay higher wages to attract workers. Higher wages, expanded federal unemployment benefits, and the fact that consumers are now spending those dollars will result in a strong economy for the second half of 2021 that can drive interest rates high. "

Kristen Herhold, spokeswoman, Clever Real Estate

30-year mortgage rates until the end of 2021: 3.4%

15-year mortgage rates until the end of 2021: 2.5%

"As the economy improves towards the hopeful end of the COVID-19 pandemic, mortgage rates will likely rise with it," says Herhold.

“If the supply of homes for sale increases, so can mortgage rates. Our survey found that 77 percent of people still planning to sell their home plan to sell their home in 2021, which means there is likely to be a surge in inventory – leading more people to apply for mortgages. "

Preetam Purohit, Head of Hedging and Analytics, Embrace Home Loans

30-year mortgage rates until the end of 2021: 3.5%

15-year mortgage rates until the end of 2021: 2.875%

"We expect the economy to heat up in the coming months," says Purohit.

“We assume that 5- to 10-year Treasuries will rise by a further 25 basis points compared to the current level. We also expect the government bond mortgage spread to rise by 25 basis points as the Fed announces the tapering of its fourth round of quantitative easing by December 2021. "

He adds, "The primary-secondary spread should remain at current levels, resulting in a net increase in mortgage rates of around 50 basis points."

Clifford Rossi, Professor of Finance, University of Maryland

30-year mortgage rates until the end of 2021: 3.6%

15-year mortgage rates until the end of 2021: 2.6%

“These projections are largely based on what happens to the yield curve between now and the end of the year,” explains Rossi, “which is likely to steepen as bond markets incorporate inflation expectations into their views.

"At least for the time being, the Fed has signaled its commitment to keep short-term rates very low so we can expect a steeper yield curve – which will affect the direction and level of mortgage rates."

30-year mortgage rates until the end of 2021: 4.25%

15-year mortgage rates until the end of 2021: 3.5%

"If the job report starts to beat expectations, we can expect a rapid and significant spike in mortgage rates, which will be accompanied by an increase in US 10-year Treasury yields as the Fed is more likely to begin its purchases of Treasuries and Secured Securities." says Wright.

“If so, we could easily see interest rates rising from their current levels. The potential for an increase in tariffs is currently far greater than a reduction in tariffs. "

Check your mortgage rates. Start here (June 22nd, 2021)

What are the mortgage rates today?

Despite the pandemic, the last few months have supported the housing market in the form of lower interest rates.

At this point in time, the 30-year and 15-year fixed-rate mortgage rates averaged 2.93% and 2.24%, respectively.

These are very attractive numbers – close to all-time lows.

This has enabled first-time buyers to take advantage of record-low mortgage rates.

And it has enabled more homeowners to refinance at lower interest rates and cheaper mortgage payments. Cash-out refinancing has also become popular as rising property values ​​and extremely low interest rates offer homeowners opportunities to withdraw their home equity.

Will mortgage rates continue to fall?

There was an initial drop in mortgage rates in 2021. In fact, January saw the lowest average rate ever, according to Freddie Mac: 2.65% for a 30 year fixed loan.

Unfortunately, there is little chance that mortgage rates will continue to fall in 2021.

The 10 experts we interviewed agreed: interest rates will either stay the same over the next 6 months or move in the direction of the high 3% mark.

"It is very unlikely that rates will drop well below 3 percent by the end of the year" – Bruce Ailion, Relator, Real Estate Attorney

"It is very unlikely that rates will drop well below 3 percent by the end of the year," warns Ailion.

“Housing prices are expected to continue to rise due to demographics, low interest rates and a strong economy that creates demand pressures. Home buyers who wait face the dual challenge of higher house prices along with higher inflation. The wait will likely cost buyers more. "

For this and other reasons, it can make sense to set a low interest rate sooner or later when you are financially ready.

Find and lock a low mortgage rate (June 22, 2021)

What is currently driving mortgage rates?

To better understand what can happen to mortgage rates, pay attention to the general economic situation.

Mortgage Rates and Inflation

High inflation numbers have the greatest potential to drive mortgage rates higher in 2021.

"Expectations of higher inflation drove mortgage rates up nearly 3.2 percent in March," said Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors (NAR).

“Even so,” she says, “the Federal Reserve has repeatedly reported that it regards all inflation as temporary without affecting Fed policies. As a result, interest rates recently fell again to below 3 percent. "

Evangelou says investors – who ultimately determine mortgage rates – "will be watching inflation closely for the next several months".

COVID cases and vaccinations

Another Impact on Mortgage Rates This Year? Coronavirus lockdowns easing and vaccination numbers spike across the country.

"This will stimulate economic growth and may be linked to an impending rate hike," explains Preetam Purohit, Head of Hedging and Analytics at Embrace Home Loans.

"However," he continues, "the Federal Reserve's quantitative easing, increasing bank demand for mortgage-backed securities, and a tightening of the primary-secondary spread have created some cushion that can dampen the rise in mortgage rates."

In other words, mortgage rates could go up at any time. But we probably won't see any sharp points.

Federal Reserve Policy

Arman Aroutiounian, Head of Capital Markets at Reali, agrees.

“The biggest driver of mortgage rates today is the actions the Fed is taking to contain the economic impact of the pandemic and keep interest rates low.

The Fed's base rate does not determine mortgage rates. But his bond-buying program has kept it artificially low since last year.

If the Fed withdraws this program anytime soon, it could have a significant impact on the interest rates that mortgage borrowers pay.

The real estate market

Edward Mermelstein, founder and CEO of One & Only Holdings, insists that a stronger economy brings greater demand for mortgages, which drives interest rates higher.

“The economy is currently on the upswing, with home sales continuing to rise – which is why mortgage rates have risen recently,” says Mermelstein.

“But when the economy slows down, mortgage rates will fall to encourage people to take out mortgages. And when the real estate market slows down, we will see lower demand for mortgages, which will put additional pressure on interest rates. "

Find and lock a low mortgage rate (June 22, 2021)

Strategy for homebuyers and refinancers

Make no mistake: waiting and hoping that interest rates will continue to fall could be a losing proposition.

Keep in mind that house prices are expected to rise 9 percent in 2021 due to limited inventory, according to NAR.

“It makes sense to wait only when mortgage rates are going to go down. But neither will likely happen in the next few months, ”says Evangelou. She recommends setting a tariff now if you enjoy a secure job and good financial health.

Others suggest that borrowers should take their time and do not pull the trigger until they are completely ready.

"Interest rates will remain relatively low for the foreseeable future, so the need to buy a home shouldn't be the primary reason for potential owners," advises Clifford Rossi, professor of finance at the Robert H. Smith School of. the University of Maryland company.

“My advice is to look at your budget and determine your housing needs over the next few years. If you are renting and you see an opportunity to get into the housing market without putting undue strain on your finances, it seems like a sensible thing to do. "

The same recommendation applies to existing homeowners considering refinancing, he says.

Your price compared to market prices

Remember that the rates mentioned here are projected averages. Even if the average mortgage rate climbs to 3.5% or more in 2021, top-tier borrowers could still get low-end interest rates.

Your own interest rate can differ greatly from the overall market. It depends on your:

Creditworthiness Type of credit Loan term House price Down payment (home purchase) or home equity (refinancing)

The mortgage lender you choose also makes a huge difference.

For example, mortgage refinancing rates can vary from one lender to the next by up to one-half percentage point (0.50%). That means significant savings in your monthly payments and long-term interest costs.

But you can't just look at the advertised prices. These are based on “sample profiles” and may not apply to you personally.

To find the lowest interest rate for your own situation, receive personalized quotes from at least 3-5 lenders. Then choose the one with the best price and lowest closing cost.

Your next step

There are several factors that will affect the real estate market by the end of December. These could drive interest rates up or down – from Fed decisions to coronavirus news to regulatory changes from Freddie Mac or Fannie Mae.

But it is best to be prepared for rising interest rates. Because that's far more likely than lower rates, at least for now.

Now is a good time to log in when you are ready. But if you aren't – as our experts have said – it is better to wait than to blow your finances in this overheated market.

Do what is right for you. And if you are not sure, your real estate agent or loan officer can help you make the right decision.

Confirm your new price (June 22, 2021)

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