In 2020, housing was an economic ray of hope for a nation that was closed inside. Globally, about a year later, things are very different – jobs are returning in the millions, a number of viable vaccines are being used across America, stimulus checks have hit bank accounts and Mortgage rates are rising rapidly from nearly a year of historic lows.
In December, when rates were still at record lows and vaccines weren’t widely available, the Mortgage Bankers Association projected 30-year mortgage rates at 3.2% in 2021, 3.6% in 2022 and 4.1% in 2023. Those projections have changed dramatically – as of March 19, the MBA revised these numbers to an average of 3 , 6% in 2021, 4.5% in 2021 2022 and 5% in 2023. The last time rates hit nearly 5% was in November 2013 and before that, almost a decade ago in the year 2011, according to Freddie Mac’s PMMS.
Joel Kan, vice president of economic and industrial forecasting for the MBA, pointed out various aid packages that would allow households to increase their purchasing power and reopen market sectors. Leisure, hospitality and travel in particular showed great increases.
Essentially, homeowners had money burning a hole in their pockets, and now that they can spend it on industries that were previously handicapped, the amount of money pumped back into the economy could ultimately make mortgage rates well above previous levels drifting through the pandemic.
“The expectation and realization of stronger growth and a stronger labor market is fundamentally putting interest rates under pressure in the further course of the year,” said Kan. “The spending and stimulus programs had to be funded somehow, and that will come Treasury Auctions that will drive interest rates higher. “
Even so, Kan expects the market to be volatile in the short term – rates could fall and then rise again in the blink of an eye. But in general, the MBA doesn’t change its forecast any further rising mortgage rates for the years to come.