What is happening with mortgage interest rates? Rates have increased this month and are expected to continue to increase over the next few months. How fast they will increase will depend on Covid trends, Federal Reserve actions and the overall health of the US economy. The average 30-year fixed rate moved from 2.99% to 3.05% in one week according to Freddie Mac. Rates will probably keep climbing throughout the month (and the remainder of this year).
What is causing the increase in mortgage rates? There are several factors driving the increase in mortgage rates. The Federal Reserve is one big factor. The Fed has moved forward with its “tapering plans”, which means that the Fed is going to slow down and eventually stop the mortgage stimulus program. They have been buying mortgage-backed securities and that has been keeping interest rates artificially low. This was a temporary measure to help the economy during Covid. As the Fed announces its plans, investors start pricing in the increase in rates. So even though the Fed has not changed any of its policies yet, just the announcement that they are planning to make the changes is enough to trigger an increase in rates.
Another factor in the increase in rates is inflation. As inflationary pressure increases due to the pandemic and monetary policy tightening, interest rates have been increasing.
Housing experts and economists are split on how high mortgage rates will go before the end of the year. Freddie Mac is forecasting an increase in rates to 3.4%, Fannie Mae is predicting rates stay as low as 2.90%. The National Association of Realtors is predicting rates increase to 3.30%. The Mortgage Bankers Association is predicting rates increase to 3.10%. That is a wide range, and my guess is it may be closer to the higher end based on what I am seeing.
Mortgage rates can change daily, sometimes more than once a day. It truly depends on what is happening in the economy. There are days we see more than one rate change, so if you are watching rates, stay in contact with your loan officer. If you are comparing rates between different companies, you need to be looking at the rates on the same day and really at the same time. I know it can be hard to do, but I have had many clients tell me that they have a rate from a week ago and that rate is no longer valid. There is a chance the rate is the same but more than likely it has changed – one way or another! It may be that the rate is the same but the cost to get the rate (paying points) may be different. Also, remember that these are average interest rates, borrowers with high credit scores and large down payments often get lower rates than borrowers with lower credit or less assets. To get your specific interest rate, you need to talk to your loan officer.
Remember that overall mortgage rates are still REALLY low. The lowest mortgage rate ever was 2.65% in January 2021 according to Freddie Mac. There are many homeowners that remember rates in the upper teens – like 18% in the 1980’s! Given those numbers, anything in the 3’s is still really low!!