When mortgage rates start to rise, it depends on a few factors how much they will increase. Furthermore, the increase also is affected how we are able to deal with the COVID-19 pandemic and its impact in the current economy.
In 2020, mortgage rates gave homebuyers and homeowners a big break in lending costs. Average mortgage rates stayed below 3% since July 2020. However, the sub-3% likely won’t last long in the current year.
As we enter the year, it did not take long for the increase in mortgage rates. Economists in the housing industry says that extreme low rates could be about to end, but the transition could be very slow.
30-Year Fixed-Rate Mortgages
The 30-year fixed-mortgage rate average is estimated to be at 2.9% this year and at 3.2% next year.
For 15-year fixed-rate mortgage, it is predicted to be at 2.39%. Therefore, a 15-year fixed-rate mortgage will have bigger monthly payment. If you wish for a lighter monthly payment, getting a 30-year loan would be less difficult to your budget. However, a 15-year loan has its benefits, too: you will save thousands of dollars in the interest and be able to pay off your loan much faster.
Predictions for Mortgage Rates in February 2021
With the new government in the senate, could prove harmful for the mortgage rates for two reasons:
First, their government programs and stimulus efforts will lift the economy; therefore, consumers spend more and establishments hire more people. Plus, the Federal Reserve will likely end its rate-reducing programs that they launched post-COVID, if the economy recovers faster than expected.
Second, more government spending means larger issuance of bonds, which the government issues to pay for their programs.
In simpler terms, the more the government spends, the higher the mortgage rates. If the government keeps issuing more bond, bond prices may go down because of supply and demand. Therefore, interest rates must keep rising to keep investors buying the bonds. Because of this, interest in mortgages also rise, since mortgages are tied to bond rates, too.
What is the Future of Mortgage Rates?
In the late 2020, mortgage rates fell to its lowest, but the future of home mortgage still isn’t easy to predict. Economic factor plays a major role, and so is how well the Americans respond to COVID-19. Once the economy starts to recover, rates will slowly rise. However, this is largely dependent on the development of the COVID-19 vaccine. With that being said, rates are likely to stay low if COVID-19 continues to cause economic crisis.
Is Now the Right Time to Buy a Property?
There is really no “right time” to buy a property—the decision and reasons are highly personal. Just remember, when purchasing a house, the monthly payment isn’t your only cost. You will also need money for down payment. You also get better deals if you have higher credit score.
However, COVID-19 has led to the shortage of homes, causing bidding wars and rising prices. With all these trends, home loaning industry can be a frustrating industry for consumers.
To ensure you fully understand every step of the way into owning a house, as well as Florida Mortgage Rates 2021, contact Greg Hayden of Mortgages Done Right. His team of highly experienced home loaning and financing experts could be your key to successfully owning a new property.