Mortgage Rates Could Stay Lower for a Bit Longer: Here’s Why

Will interest rates on mortgages finally start rising sometime this year? While no one can predict the future of rates, experts are saying last year’s low-rate environment will most likely set the tone for 2021.

That probably means another year of continued (and historically) low mortgage rates on the horizon, giving YOU the opportunity to buy your first home, trade your existing home for another property, or refinance your mortgage into a lower interest rate to save cash every month.

Benton Capital Mortgage Lending is educating local consumers and customers on why mortgage rates have the potential to stay on the lower side for a bit longer than anyone anticipates. That means as of RIGHT NOW, it’s not too late to make your move as your household’s 2021 financial plans kick into gear. Here’s why:

• The experts at Fannie Mae and Freddie Mac have signaled they believe mortgage rates probably won’t rise significantly anytime in the near future (and for good reason). These public-private mortgage industry giants not only come up with their own educated guesses based on research, they survey a broad range of mortgage lenders as well. The average rate on a mortgage was 2.7 percent for 2020 (all 12 months combined), and it will probably shake out to 2.9 percent for 2021 according to Fannie and Freddie — not much higher. Their forecasts aren’t always exactly correct, but they provide a general compass for the entire industry to use. Don’t necessarily expect you will get this rate, as yours may be slightly lower or higher depending on your financial situation as a borrower. (On a side note, the Mortgage Bankers Association is projecting an average rate of 3.2 percent for 2021, which is still very low by historical standards!)

• Trends in the economy and domestic/global financial markets are making sure downward pressure stays on mortgage rates for the time being. The economy is recovering from last year’s COVID-19 recession at a slow-and-steady pace (not overly fast). The Federal Reserve has promised to do what it can to keep both short-term and long-term interest rates “lower” for as long as the economy and businesses need it to. Domestic and global investors still want safe assets to put their money into (mortgage bonds and Treasury bonds). And there’s been no major disruption to the federal government’s 12-year ownership role in Fannie Mae and Freddie Mac for now. All these factors are making sure mortgage rates stay lower for longer.

• For the average homebuyer or homeowner, rates on mortgages do not change significantly overnight — it happens waves. Think several days, weeks, or even months. It means you can watch the forces that shape which way mortgage rates MAY be headed (higher or lower) on a daily basis to help you make a decision. Don’t get too technical. Instead, follow the yield on the 10-year U.S. Treasury bond rate. If the “10-year treasury” rises or falls, usually mortgage rates will also go up or down as well — although it’s not a perfect correlation, just an approximate one. You can view the U.S. Treasury Department’s daily rates on its 10-year bonds here (see the “10 Yr” column).

Predictions are just that — predictions. Could something unforeseen throw a wrench into this “lower for longer” forecast? Absolutely. However, organizations and companies in both private and public spheres have put their best people on the question, and what’s mapped out above is what they predict.

Just remember: mortgage rates can always “tick up” briefly before they fall significantly, and they can “tick down” shortly before they jump higher again. Being in-the-know with the information above is much more important than trying to chase the perfect rate you want.

Benton Capital Mortgage Lending can asses your debt-to-income ratio (DTI), FICO score, financial variables, and get you on the road to a highly competitive, low-priced mortgage! Visit Benton Capital Mortgage Lending to start a home-purchase mortgage application. Or if you’re refinancing, text an image of your current monthly mortgage statement to 719-331-5443 and owner Mike Benton will tell you HOW MUCH money you can save each month.