Mortgage rates have closed in 2020 around the lowest levels recorded. But those who want to get this financial funding 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 from the new record low of 2.66% set the previous week, Freddie Mac FMCC,
reported Thursday.
Meanwhile, the 15-year fixed-rate mortgage fell two basis points to an average of 2.17%, representing a record low for this mortgage product. The 5-year Treasury-indexed hybrid adjustable-rate mortgage fell eight basis points to 2.71%.
“By the end of 2020, we can look back on a year when low mortgage rates served as powerful fuel, driving activity and giving buyers access to a home,” said George Ratiu, senior economist at Realtor.com .
On more than a dozen different occasions this year, mortgage rates fell to record lows, according to Freddie Mac’s weekly report. In fact, rates fell to levels once they were believed to be unfeasible, if not impossible.
But there are several factors that could raise rates in the new year. “Compared to the passage of the recently passed COVID-19 bill, which the markets have been waiting for months, the results of the two Senate elections in Georgia and the possibility of more tax relief are much less certain in the eyes of investors and could therefore cause sudden 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 appear unlikely,” Speakman added.
In the long run, the trajectory of the pandemic and the economy will have a major influence on rates. With the vaccines underway, the global community seems ready to start coming out of 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 they differ in how much rates will rise.
Whatever the amount, rising mortgage rates threaten to make buying a home unaffordable at a time when house prices are rising in record amounts. “Hopefully rising mortgage rates may challenge first-time buyers who are still struggling to find an affordable home, as inventory reaches lows and prices continue to rise,” Ratiu said.