Mortgage rates have closed around their lowest ever levels in 2020. But if you want to secure this cheap financing, you should not wait too long on the sidelines.
The 30-year fixed-rate mortgage averaged 2.67% for the week ending December 31, a basis point higher than the new record low of 2.66% the week before, Freddie Mac FMCC,
reported Thursday.
Meanwhile, the 15-year fixed-rate mortgage fell two basis points to an average of 2.17%, a low point for that mortgage product. The five-year Treasury-indexed floating-rate hybrid mortgage fell eight basis points to 2.71%.
“As 2020 draws to a close, we can look back on a year when low mortgage rates provided powerful fuel, boosted and provided buyers with access to a home,” said George Ratiu, senior economist at Realtor.com.
According to Freddie Mac’s weekly report, mortgage rates have fallen to record lows on more than a dozen separate occasions this year. Indeed, rates fell to levels once considered unattainable, if not impossible.
But a number of factors could increase rates in the new year. Compared to the passing of the recently passed COVID-19 relief law, which markets had been expecting for months, the results of two Senate elections in Georgia and the possibility of more tax relief are both much less certain in the eyes of investors. and thus could lead to sharp swings in bond yields depending on the outcome, ”said Matthew Speakman, an economist at Zillow ZG,
Mortgage rates roughly follow the direction of long-term yields, especially the 10-year Treasury. “Until more is known on any of these fronts, meaningful moves in mortgage interest rates seem unlikely,” added Speakman.
In the longer term, the trajectory of the pandemic and the economy will have a major impact on rates. With vaccines being rolled out, the global community appears poised to emerge from the pandemic. If that benefits the US economy as expected, rates are bound to rise.
Accordingly, most economists have predicted a rate hike for 2021, although they differ on how much rates will increase.
Whatever the amount, rising mortgage rates threaten to make buying a home unaffordable at a time when home prices are soaring at record amounts. “We expect rising mortgage rates to be a challenge for first-time buyers who are still struggling to find affordable homes as stocks hit new lows and prices continue to rise,” said Ratiu.