Mortgage Rates Trends in 2021

by | Oct 28, 2021

Mortgage Rates Trends in 2021

Mortgage Rate Trends in 2021

Mortgage rates were at an all-time low during the first few months of this year.  However, by April they were back up to 3.18%.  Throughout the year there has been a fluctuation as rates have recently dropped back down to 2.78% at the beginning of July. Currently, they are hovering back up to around 3%.  However, experts forecast that rates will rise moderately to a yearly high by the end of 2021.  Mortgage rates go hand in hand with inflation.  Since the Covid-19 pandemic, our economy went through a period of decreased inflation.  With decreased rates of inflation, rates stay low.  However, as more people get vaccinated and more control is taken over the Coronavirus, we expect the economy to rebound even more.  This will result in Mortgage Rate Trends in 2021 staying steady but rising slightly by year’s end.

Recession in 2021 Caused Lower Mortgage Rates

The US is rebounding from the recession caused by the pandemic.  This will cause rates to begin to increase.  This is due to the fact that when unemployment rates are high and the economy is weak, lenders will tend to lower their rates to entice a different group of homeowners who can afford to borrow and wouldn’t normally refinance unless the rate would create an advantage for them.  When the economy is strong, rates rise as the demand to borrow increases.  How quickly or if the United States can build herd immunity will determine how quickly rates rise.  And how quickly we can achieve that depends largely on the vaccine.

The Federal Reserve Indirectly Affects Mortgage Rates

When the Federal Reserve decreases the “Federal Fund Rate” the housing market is indirectly affected which results in lower mortgage rates. This last Spring, the Federal government decided to buy hundreds of billions of dollars worth of Treasurys and mortgage-backed securities to keep long-term interest rates down during the Pandemic.  Very rarely do the Federal Fund Rate and interest rates go in opposite directions.  The Federal Reserve will likely plan to keep its effect on the housing market stable which will keep mortgage rates low throughout the rest of the year.  In fact, until Covid-19 is completely under control interest rates should not rise to pre covid levels of 4.05% that we saw in July 2019.  It is predicted the Federal Reserve will not raise rates much higher any time soon.

Long Term Mortgage Rates Trends in 2021

It is difficult to predict what interest rates will do over the next year until there is a better picture after we will finally have Coronavirus contained to the point where our economy and unemployment have recovered to pre-covid levels.  However, we can predict that the overall mortgage rate will climb slightly as everyday life slowly gets back to normal.  The biggest factor in how quickly mortgage rates will rise will be how effective the covid-19 vaccine is and how quickly the US recovers from the pandemic that has crippled the economy and created mass unemployment.

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Written By Garett Wolff

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