The middle of the year is the best time to think about mortgage interest rate climate in the past six months, and speculate about what’s in store for borrowers ahead of calendar revolutions by 2022.
Prices remained seductively low throughout the first half of 2021 – lower than many experts had predicted six months ago. And the forecast for July also does not imply a radical jump in rates.
But there are several factors at play that can easily cause you to pay at least a little more to buy or refinance a home loan in the coming weeks. This is the unanimous opinion of a group of industry professionals we interviewed who expect mortgage rates to rise slightly at worst or remain unchanged over the next month.
July mortgage rate forecasts
This view is shared by Leonard Kiefer, deputy chief economist at Freddie Mac in McLean, Virginia. “Rates may rise slightly over the next month, but are likely to be quite close to current rates – about 3 percent for a 30-year fixed-rate mortgage,” he says. “While inflation has ticked higher in recent months, many analysts believe most of the rise in consumer prices is transitory. Thus, even with higher inflation rates, mortgage rates remained fairly stable. I expect that these almost historically low mortgage rates will continue at least into the early summer. ”
June began and ended with a 10-year Treasury rate of about 1.5%. Mortgages tend to track this figure most of the time.
Taylor Marr, lead economist at Redfin in Washington DC, adds: “With mortgage rates holding just below the 3 percent we saw in June, I think we are getting closer to keeping rates stable at level from 3 to 10. basis points are higher. The bond market signals that the current economic and inflationary trends are temporary, which leads to lower rates. “
Marr is encouraged by signs of economic stability as America continues to reopen and, after months of pandemic restraints, things are back to normal.
Greg McBride, CFA, chief financial analyst at Bankrate, expects mortgage rates to rise in July. “This is because the Federal Reserve has indicated that they are discussing how to start ditching the housing they provide with $ 120 billion in monthly bond purchases,” he explains. “Between this development, as well as strong economic growth and high inflation, you will see increasing pressure on mortgage rates.”
This idea is supported by Nadia Evangelu, Senior Economist and Director of Forecasting at the National Association of Realtors in Washington, DC.
“Next month rates will rise rather than fall. Remember that when inflation rises, mortgage rates tend to rise, ”says Evangelu. “Nevertheless, inflation may continue to rise in the coming months, but at a slower pace. In fact, inflation rose 0.6 percent in May on a monthly basis, after rising 0.8 percent in April. Thus, I expect to see slower price increases in the coming months. As a result, rates on mortgage loans will rise slightly in July, but will still remain at the level of 3.0 percent. “
Dynamics of mortgage rates in the second half of 2021
Evangelou expects a standard 30-year fixed rate mortgage to average 3.2 percent by the end of the year, a figure close to where we are now.
“The economic outlook for the US looks brighter for the rest of the year as economic activity and employment indicators have strengthened. This is mainly due to positive progress in COVID-19 vaccines and additional policy support, ”she says.
Keep in mind that with economic growth, consumer spending increases and the demand for home loans increases. Consequently, mortgage rates are likely to rise slightly before New Years.
Yet despite significant progress in the labor market, “we still lack the 7 million jobs that will bring us back to pre-pandemic levels,” says Evangelu, adding that the X factor could hold back rates.
McBride agrees that this template may change his scenario for higher stakes. “If job growth is disappointing, or if the corporate earnings forecast for 2022 turns out to be weak, rates could decline in the second half of 2021,” he says.
Inflation remains a pervasive problem that can also affect performance.
“Supply constraints in the economy as a whole could lead to some persistent inflationary pressures. If the market deems higher inflation likely, this, in turn, could put additional upward pressure on mortgage rates, ”says Kiefer. “There is some risk that inflation expectations could rise faster than expected.”
Note that the Fed could respond to higher-than-expected inflation rates by adjusting purchases of mortgage-backed securities, even if they leave short-term interest rates unchanged for several years.
“However, nothing will happen anytime soon and the Fed will deliberately work to avoid a repeat”hysterics“2013, which led to a jump in mortgage rates,” says Marr.
Latest predictions published Fannie Mae, Freddie Mac, but Mortgage Bankers Associationrespectively, include 30-year forecasts for fixed rate mortgages of 3.0 percent, 3.2 percent and 3.5 percent on average for the remainder of the year.
Secure your mortgage rate soon if your financial house is in order
Still not sure what your next mortgage step should be? Here are some tips from knowledgeable people.
“It doesn’t make sense to wait long if you want to refinance,” McBride suggests, “since mortgage rates remain lower than ever before summer 2020 and there is a risk that they will rise.”
Kiefer agrees. “There is some risk that borrowers who are waiting to refinance might miss their chance if rates do not come back down sharply. Our research indicates that many borrowers could potentially save a significant amount of money if they were directed to refinance today, ”he says.
“Refinancing candidates will benefit if they even take a look at the market rates compared to their current rate and possibly reach out to a lender to see what options they might have to suit their particular situation.”
If instead you see buying a new or resale home, take a close look at your money, job stability, and funding window.
“For a buyer already forced to afford a home in today’s market, it might be better to wait to save more money until competition slows down, given that the risk of missing out on low rates has eased in recent months,” adds Marr.
Evangelu says that if you don’t feel financially secure, take your time to fix the rate.
“I don’t see a drop in rates or house prices in the coming months. Even if they do rise, rates are likely to remain close to historic lows. Remember that the historical average of a 30-year fixed rate mortgage is 8 percent, significantly higher than today. Although rates are now nearly 30 basis points higher than in the first week of the year, the result would be an increase in your monthly mortgage payment by only less than $ 50. ”
In other words, there is a little fear of paying a lot more on your mortgage if you wait it out until you are financially ready.
However, sitting on the sidelines can mean missing out on opportunities for a preferred property.
“In today’s hot real estate market, homes are selling lightning fast — nearly one in six sells in three days or less,” adds Kiefer. “You can try to wait until there are more offers on the market; but with home prices rising more than 10 percent year-on-year across the country in recent months, you may have to pay a little more when the offer actually comes in. “