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Fall means flying pigskins, falling leaves and dropping temperatures, but don’t hold your breath for mortgage rates drop much more in the coming weeks. Those in the know expect rates to remain stable in the short term before eventually rising again at year end.
The average 30-year mortgage rate fell to 3.04% in the week ending Aug. 25, from 3.06% a week earlier, according to Bankrate Weekly Survey of Major Lenders. And rates in August barely hovered above the record low of 2.93 percent set in January.
What’s your best mortgage decision for the future? Read on for predictions and recommendations.
September mortgage rates
To predict the near future with more confidence, it helps to revisit the recent past. Summary of the month of August, several events could shape the trajectory of mortgage rates in the next weeks. We saw a robust jobs report in August, with 1.4 million new jobs added. And we’ve learned that the COVID-19 recession only lasted two months in 2020, according to the National Bureau of Economic Research, making it the shortest U.S. recession on record.
But the rapid collapse of the Afghan government to the Taliban has added political and security concerns, and the eventual passage of infrastructure legislation and the proposed $ 3.5 trillion economic package remain uncertain. The Delta variant of the coronavirus continues to spread and stress the healthcare system.
“Any economic impact from the Delta variant will become apparent as economic data for August is released throughout September, which should help control rates this month,” said Greg McBride, Chief Financial Analyst of Bankrate. “Inflation remains a wild card as well, and the debate over whether inflation is transient or more sustained is months away from being definitively resolved.”
Nadia Evangelou, senior economist and director of forecasts for the National Association of Realtors, agrees that mortgage rates will show little movement in September, likely remaining around or below 3%.
“Although Fed officials are discussing cuts to their bond purchases, I don’t think that will happen until November,” she said. “In the meantime, house prices have reached new highs, making the transition to homeownership even more difficult for many tenants. “
Evangelou notes that when rates fell in 2020 during the pandemic, an additional 3.7 million households could buy a home compared to 2019. Today, however, due to high house prices, 4.8 million fewer households can buy a home compared to two years ago.
“As a result, rents are likely to rise faster over the next few months, putting upward pressure on inflation,” she adds.
Daryl Fairweather, chief economist at Redfin in Milwaukee, also predicts that rates will remain relatively unchanged until September.
“But if the global economy improves, it could lead to higher mortgage rates, as investors would want to invest their money in higher return, higher risk investments if they are optimistic about global growth.” , said Fairweather. “The global economy could improve if the fight against COVID improves or if consumption and production take off. “
Fourth Quarter Mortgage Rate Forecast
The big real estate groups expect little change between now and the end of the year in terms of rates. The Mortgage Bankers Association expects the 30-year fixed rate mortgage to average 3.3% over the last three months of 2021; Freddie mac’s the most recent outlook sets the year-end closing rates at 3.1%, while Fannie Mae has a more generous forecast for borrowers: an average rate of 2.9% over the remainder of 2021.
“Many of the fluctuations that we might see in interest rates over the rest of the year will depend on the end of some unemployment benefits and some people returning to work as well as any restrictions caused by COVID,” he said. said Ralph DiBugnara, founder of Home Qualified. “If we continue to see positive employment reports with a decrease in the number of unemployed, we will experience a possible rise in interest rates. However, if the coronavirus restrictions start to shut down some of the normalcy for business again, I think we could see rates stay low and maybe even cut. “
McBride expects slightly higher rates from October to December, “especially as the persistence of inflation becomes a major concern. But mortgage rates in the low 3% range, and below 3% for those who shop around, will always prevail. However, there will be this ongoing tussle between inflation and whether or not the virus is hurting economic growth. We have seen yo-yo rates rise and fall due to these uncertainties, and that shouldn’t change anytime soon. “
Evangelou believes rates will average 3.2% for the remainder of 2021, based on several factors.
“Employment is coming back strongly and most economic indicators will start to normalize in the coming months,” she said. “In the meantime, the Fed will likely cut back on bond purchases before the end of the year. This change may cause Treasury yields and mortgage rates to rise.”
What Homebuyers, Refinancers Should Do
Like a football team hoping to score before time runs out, your opportunity to take advantage of low mortgage rates won’t last forever. It makes sense to lock in a rate now if you are in a strong financial position and have a solid job outlook. But don’t let anyone force you to fundraising prematurely.
“If the rate available today matches your purchasing or refinancing needs, then it is imperative to act quickly. Waiting in an unpredictable market with factors beyond your control is not smart and could ultimately hurt how much you end up paying in housing costs, ”said DiBugnara.
Not 100% sure about buying a home or your future plans? It’s probably best to postpone your mortgage decision until you’re more secure, suggests Fairweather.
“But keep in mind that mortgage rates are near all-time lows, while house prices are at all-time highs. Except increase in housing supply, overall affordability of homes is likely to continue to worsen over the next decade, ”says Fairweather. “So I wouldn’t recommend putting off buying a house for too long. “
If you are considering refinancing, don’t push your luck too far, argues McBride; try to lock in a low rate soon.
“If you’ve had your mortgage since before the pandemic, there’s a very good chance you can refinance profitably now,” he says, “given the drop in mortgage rates since then. “