Mortgage rates are likely to stay close to record lows in August 2021

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Summer’s dog days have officially arrived. But while temperatures are likely to rise across most of the country in the coming weeks, mortgage interest rates probably won’t. This is, of course, good news for many buyers and homeowners looking for a purchase loan or refi.

Mortgage rates remain close to historic lows, having recently dropped to their lowest level since last winter. An indicative 30-year fixed-rate mortgage hovered around 3 percent by the end of July, while a 15-year fixed interest rate was around 2.3 percent.

As with the weather, things can quickly change for better or worse. So what’s the best strategy for a mortgage applicant to lock in now or see where rates are on multiple calendar pages? This will depend on your goals, schedule, and financial perspective.

Forecast mortgage rates for August

In July, rates dropped unexpectedly, which worried many potential borrowers. Many were also delighted that the Federal Housing Finance Agency (FHFA) canceled 0.5% refinancing fee for Fannie Mae and Freddie Mac loans starting August 1st. Will these low rates last long with us?

“The likelihood of an increase in mortgage rates in the coming months is higher. However, do not expect sharp spikes in August, ”says Nadia Evangelu, senior economist and director of forecasting at the National Association of Realtors in Washington DC. “I expect mortgage rates to change little in August, hovering around 3 percent as most economic indicators begin to normalize.”

Chuck Biscobing, senior real estate attorney at Cook & James in Atlanta, agrees.

“I expect that next month rates will be more or less stable in the 3% range for a 30-year mortgage. Given the recent unexpectedly high number of jobless claims, I think a major rate hike is unlikely, ”he notes. “Monthly inflation rates are kind of a template, but overall I think the pace will remain at current levels for now.”

Indeed, inflation and growth are the most important variables, according to Greg McBride, chief financial analyst at Bankrate.

“Ironically, both have resulted in lower long-term rates. However, any hints of a cutback in bond purchases from the Federal Reserve will lead to higher mortgage rates this month, ”adds McBride. “It is not yet known how the debate over whether inflation is transient or more stable is being resolved. But if these temporary factors provide evidence pointing to higher inflation, we will see a jump in rates. ”

George Wright, senior economist at Realtor.com, said in a recent statement that home buyers “are still shackled by high prices, limited stocks and rising inflation that is cutting their monthly salaries. At today’s rates, the monthly mortgage payment for a home with an average price of $ 109 is higher than at the same time in 2020. ”

Fall 2021 and Beyond Tariffs

Industry experts predict several major fluctuations in mortgage interest rates from today to the end of the year. Fannie Mae provides for a 30-year fixed-rate mortgage with an average of 3% by the end of 2021, which is close to Freddie Maca forecast 3.1 percent. IN Mortgage Bankers Association predicts an average rate of 3.4 percent for the year, once 2021 comes to a close.

“Moderately higher mortgage rates are the most likely outcome, especially as continued inflation is becoming a more serious problem. But the good news is that mortgage rates averaging 3 percent and below 3 percent for shoppers will continue to prevail, ”McBride says.

If we do see inflation continuing, the Fed may be forced to abandon asset purchase programs and rates could jump faster than expected, Biscobing warns.

“However, I think there is a strong possibility that the inflation we are seeing is closely related to the supply chain problems associated with the COVID outage. I think these issues should be resolved by themselves in the next few months. However, I think the 30-year mortgage rate will continue to rise and may approach 3.5 percent by the end of the year, ”he says.

This is exactly the New Year’s date on which, according to the Gospel, the stakes will rise.

“While jobs are recovering quickly, we are also seeing many campuses preparing to host students in the fall. Thus, millions of students will soon be looking for housing, which will further increase the demand for rental homes, ”she says. “Remember that rents are the main component of inflation, at over 40 percent of core inflation.”

A slowdown in vaccination progress and an increase in the number of coronaviruses could lower rates slightly in the coming months.

“Concerns about the growing number of cases associated with the Delta option could decrease in terms of both 10-year Treasury yields and mortgage rates,” says Evangelu. Treasury rate and mortgage rates closely track each other.

On the other hand, additional Congressional spending could lead to higher mortgage rates as the market raises rates ahead of any Fed move.

“Congressional spending on infrastructure will add fuel to the inflation fire, but it remains to be seen if this is enough to get the Fed to act,” Biscobing said.

It’s time to get your mortgage

Now is a fantastic time to take advantage of the comparatively low mortgage rates. The problem is, can your wallet handle the monthly payments required to get the average asking price for a house?

“Many novice shoppers are underpricing despite these historically low prices. While inventory is particularly limited in the $ 270,500 new home price range, the gap in affordability between first-time buyers and all buyers is 34 percent, making it even more difficult for them to buy a home, ”says Evangelu.

Biscobbing and says there are no easy answers for many.

“Buying a house right now is a difficult choice. Rates are likely to rise in the future, so getting a cheap mortgage makes sense now. However, house prices are at or close to record highs and construction costs are still high, ”he says. “This begs the question: Do you want to wait for a drop in house prices and material costs, which could lead to a higher mortgage loan, or do you want to gain a foothold now and not worry so much about the purchase price?”

However, when it comes to refi, the experts give the green light.

“The gold refinancing opportunity has lasted much longer than expected, but don’t tempt fate. Set a flat rate of less than three percent while you can, ”McBride says. “The significant reduction in mortgage payments is especially valuable in connection with the rise in the cost of many other items of the family budget.”

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