The COVID-19 pandemic has massively impacted the economy over the last year, including the property market. Mortgage rates have been greatly affected. But as we edge closer to a post-pandemic world, what mortgage rate trends can we expect to see in the near future? Let’s find out.
Predictions for Mortgage Rate Trends
As progress in defeating COVID-19 continues to be made with the rollout of vaccinations, we can expect to see mortgage and refinance rates rise. As for current mortgage rates, prospective homebuyers can check out MoneyWise to find out the average mortgage interest rate available from different lenders. As the economic outlook strengthens, growth and inflation are expected, driving long-term rates higher. One way of predicting post-pandemic mortgage rates is to look at long-term Treasury bond rates. In August 2020, the ten-year Treasury yield was at a very low point, but it climbed back up to 1.7% by March 2021. As long-term bond yields rise, mortgage rates should become higher.
Another major part of post-pandemic economic recovery is people returning to work. That itself is reliant on how accessible the coronavirus vaccine will be over the next few months. But as long as the vaccine rollout stays on track, mortgage rates should rise.
However, while the key indicators show mortgage rates should become higher, it is still very much dependent on the pandemic situation. With new variants of COVID-19 occurring in parts of the world, the economic recovery may not be as quick as the experts are generally predicting. There could also be unforeseen issues with vaccination distribution and other problems. Such things could affect the stock market, and in turn, that could impact mortgage rates. But even if the stock market does drop, it should only be short-term.
What do the experts say?
To get a better idea of what precise mortgage rates could look like over the rest of 2021, let’s see what the experts have to say:
Lawrence Yun, who is the National Association of Realtors’ Chief Economist, says mortgage rates will be similar or slightly higher than they were in 2020, perhaps reaching 3%.
Danielle Hale, who is the Chief Economist at Realtor.com, expects mortgage rates to remain low throughout the first half of 2021, at around 3%. But she can see the rate rising to around 3.4% by the end of the year, as long as the vaccine rollout is successful and it helps the economy improve in the ways that experts predict.
Logan Mohtashami, who is a housing data analyst at HousingWire, also says the average mortgage interest rate will gradually increase in 2021, but the rate is very unlikely to go above 4%.
Bruce Ailion, who is a realtor and attorney, believes mortgage rates could stay low, though. That is because there is a significantly lower demand for loans which, when paired with declining inflation and ten-year Treasury Notes approaching zero, can cause mortgage rates to decrease. Ailion predicts rates could go down to 2.75%.
While experts may slightly differ in their predictions, most agree that mortgage rates will remain low until there is more certainty about the effectiveness of the vaccine rollout and how that leads to economic recovery. All being well, we should soon be able to return to a more normal life, and when the pandemic is under control, mortgage rates will start going up.