Mortgage rates closed in 2020 around the lowest levels recorded. But those who want to block this cheap financing should not wait too long on the sidelines.
The 30-year fixed-rate mortgage increased by an average of 2.67% for the week ending December 31, up one basis from the new record low of 2.66% set in the previous week, Freddie Mac FMCC,
reported on Thursday.
Meanwhile, the 15-year fixed-rate mortgage fell two basis points to an average of 2.17%, representing a record high for that mortgage product. The 5-year mortgage with adjustable hybrid rate indexed by the Treasury decreased by eight basis points, to 2.71%.
“With the end of 2020, we can look back to a year in which low mortgage rates served as a strong fuel, driving business and giving buyers access to a home,” said George Ratiu, senior economist at Realtor.com.
On more than a dozen separate occasions this year, mortgage rates have plummeted, according to Freddie Mac’s weekly report. Indeed, rates fell to levels once thought invisible, if not impossible.
But a number of factors could push rates higher in the New Year. “Compared to the passage of the new COVID-19 bill, which the markets have been waiting for months, the results of two Senate elections in Georgia and the possibility of a greater tax exemption are much less certain in the eyes of investors and could thus cause sharp movements in bond yields based on their results, “said Matthew Speakman, an economist at Zillow ZG,
Mortgage rates roughly follow the direction of long-term bond yields, especially the 10-year treasury note. “Until more is known on any of these fronts, significant movements in mortgage rates seem unlikely,” Speakman added.
In the longer term, the trajectory of the pandemic and the economy will have a major influence on rates. With the launch of vaccines, the global community seems ready to start emerging from the pandemic. If this benefits the US economy as expected, rates will certainly rise.
As a result, most economists have projected a rate hike for 2021, although it differs depending on how much the rate will rise.
Whatever the amount, rising mortgage rates threaten to make it inaccessible to buy a home at a time when house prices are rising by record highs. “We expect rising mortgage rates to challenge first-time buyers who are still struggling to find an affordable home as inventory hits new lows and prices continue to rise,” Ratiu said.