The middle of the year is as good as any other to get over that Mortgage rate Climate of the past six months and speculation about what borrowers can expect by the calendar year 2022.
Interest rates remained temptingly low in the first half of 2021 – lower than many experts had predicted six months ago. The outlook for July does not call for a radical hike in interest rates either.
However, there are several factors at play that can easily result in you paying at least a little more to buy or refinance a home loan in the coming weeks. This is the unanimous opinion of the group of industry professionals we surveyed, who assume that in the worst case scenario, mortgage rates will rise slightly or remain unchanged for the next month.
Mortgage rate forecasts for July
This is the opinion of Leonard Kiefer, deputy chief economist at Freddie Mac in McLean, Virginia. “Interest rates could go up a bit next month, but probably pretty close to where they are today – about 3 percent for the 30-year fixed-rate mortgage,” he says. “While inflation has risen in recent months, many analysts believe much of the rise in consumer prices to be temporary. So even with higher inflation rates, mortgage rates have remained fairly stable. I would expect these almost historically low mortgage rates to remain in place until at least early summer. “
June began and ended with a benchmark interest rate for 10-year government bonds of around 1.5 percent. Mortgages tend to track this rate most of the time.
Taylor Marr, Senior Economist for Washington, DC at Redfin, added, “With mortgage rates stuck just below the 3 percent we saw in June, I think we are well on the way to getting rates at keep stable about 3 percent to about 10 basis points higher. The bond market signals that current economic and inflation trends are temporary and that interest rates will remain lower. “
Marr is encouraged by signs of economic stability as America continues to open up and things return to a sense of normalcy after many months of pandemic lockdown.
Greg McBride, CFA, senior financial analyst at Bankrate, sees mortgage rates on the upswing in July. “That’s because the Federal Reserve has hinted that they are discussing how to get rolling some of the housing they’ve provided through monthly bond purchases worth $ 120 billion,” he said. “Between this development and robust economic growth and higher inflation, you will see upward pressure on mortgage rates.”
This performance is supported by Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors in Washington, DC
“Interest rates will rise rather than fall next month. Remember, mortgage rates tend to rise when inflation picks up, ”says Evangelou. “However, inflation could continue to rise in the following months, albeit at a slower pace. In fact, inflation rose 0.6 percent on a monthly basis in May, after rising 0.8 percent in April. Therefore, I expect slower price gains in the coming months. As a result, mortgage rates will rise slightly in July but will still stay near 3.0 percent. “
Mortgage rate trends in the second half of 2021
Evangelou expects the 30-year fixed-rate mortgage benchmark to average 3.2 percent by the end of the year: a mark not far from where we are now.
“The economic outlook for the US looks better for the remainder of the year as activity and employment indicators have improved. This is mainly due to positive advances in COVID-19 vaccines and additional political support, ”she says.
Keep in mind that as the economy grows, there will be higher consumer spending and higher demand for home loans. As a result, mortgage rates are likely to rise somewhat by the New Year.
Despite significant advances in the labor market, “we are still missing 7 million jobs that will bring us back to pre-pandemic levels,” says Evangelou, adding that this X-factor may prevent rates from spiking.
McBride agrees that this wildcard could change its higher interest rate scenario. “If job growth disappoints or corporate earnings forecasts for 2022 look weak, rates could fall in the second half of 2021,” he says.
Inflation remains a pervasive problem that could affect interest rates as well.
“Supply shortages in the overall economy can lead to some persistent inflationary pressures. If the market thinks higher inflation is likely, this in turn can put additional upward pressure on mortgage rates, ”says Kiefer. “There is a certain risk that inflation expectations will rise faster than expected.”
Note that the Fed can react to unexpectedly high inflation numbers by adjusting its mortgage purchases, even if they leave short-term interest rates unchanged for a few years.
“Still, nothing is likely to happen in the near future, and the Fed will purposely work to have a repeat of the ‘Taper tantrum‘2013 led to an increase in mortgage rates, “says Marr.
Current forecasts published by Fannie Mae, Freddie Mac, and the Association of Mortgage Lenders, included 30-year fixed-rate mortgage forecasts of 3.0 percent, 3.2 percent, and 3.5 percent averages for the remainder of the year.
Get yourself a mortgage rate soon if your finance house is in order
Still not sure what your next mortgage move should look like? Here is some advice from those in the know.
“There’s no point waiting much longer when looking for refinancing,” suggests McBride, “since mortgage rates are lower than anything seen before summer 2020 and there is a risk that they will go up. “
Kiefer agrees. “There is a certain risk that borrowers who wait to refinance will miss their chance if interest rates go up and don’t go down. Our research shows that many borrowers could potentially save a lot of money by refinancing today, ”he says.
“Refinancing candidates would benefit from at least taking a look at market rates versus their current rate, and possibly reaching out to a lender to find out what options they might have for their particular situation.”
If instead buying a new or resale home is on your radar, consider carefully your money, job stability, and funding window.
“A buyer who can already afford a home in today’s marketplace may be better off waiting for the competition to subside as the risk of missing out on low interest rates has decreased in recent months,” adds Marr.
Evangelou says if you are not feeling financially secure, don’t rush to set a tariff.
“I don’t see any interest or house prices falling in the following months. Even if they do rise, rates are likely to stay near historic lows. Remember, the historical average of the 30-year fixed-rate mortgage rate is 8 percent – much higher than it is today. And while interest rates are now nearly 30 basis points higher than the first week of the year, it would only have increased your monthly mortgage payment by less than $ 50. “
In other words, you are little afraid of paying much more on a mortgage if you wait until you are financially ready.
Still, sitting on the sidelines can mean missing out on chances of finding a preferred property.
“In today’s hot real estate market, houses sell at lightning speed – almost one in six are sold within three days or less,” adds Kiefer. “You could try to wait for more supply to come on the market; But with house prices up over 10 percent year-on-year in the past few months, you may have to pay a little more if that offer hits. “