Will Mortgage Rates Go Down Again?

Mortgage rate predictions continue to look good for homebuyers in 2020, despite a new fee from Fannie Mae and Freddie Mac which is set to take place in December. There has been a lot of confusion about the new fee from these government-sponsored entities. The new fee applies only to refinances and is consistent with a lump-sum of one-half of one percent of the loan balance. Again, this applies to refinances on single-family home loans. The new fee to start in December 2020 does not apply to mortgages for new home purchases.

Mortgage Rate Predictions

As mortgage rates go down, an estimated 18 million homebuyers are benefiting from home loan refinances. Despite the fact that key interest rates dropped at the onset of the pandemic, mortgage rates did not follow suit. Some mortgage rate predictions cite the Fannie Mae and Freddie Mac fee as a cause for the eventual slowing down of mortgage rate decreases. That said, mortgage rates are still predicted to continue on a downward trajectory. 

Mortgage rate predictions for 2019 turned out to be off-base as many predicted higher mortgage rates than we saw in actuality. In the second half of 2019, mortgage rates went down quite a bit. This decline in rates had many speculating about 2020. Would the rates continue to drop? Could there be a plethora of new factors to increase the rates? For many in the market to buy a home, the uncertainty of mortgage rates in 2020 was extremely unsettling. 

Housing authority groups predicted that mortgage rates would go down and continue to stay low. However, it can be difficult to plan for these uncertain times and many are skeptical of predictions being made in light of the stark difference we saw in 2019. For even the most informed financial experts, mortgage rate predictions are a moving target with many variables. All that said, predictions for 2020 continue to suggest that rates will stay low. Now may be the best time to secure your mortgage rate as it is unlikely that the decline will last into 2021.

As we mentioned, the treasury rate dropped in early 2020, but mortgage rates did not completely follow in that downward trajectory. The National Association of Realtors (NAR) predicts that interest rates will stay hovered at 3.6 to 3.7 percent for a 30-year fixed-rate home loan. However, the National Association of Home Builders (NAHB), predicts something more like 3.9 percent. 

In June, the NAHB predicted that interests rates would rise to 4.49 percent in 2020, so the adjusted prediction of 3.9 percent says quite a bit about the anticipated trajectory of mortgage rates in 2020. Most housing authorities surveyed consistently predict rates of 3.5 to 3.7 percent. 

In 2019 mortgage rates were at an all-time low. Financial experts advised home buyers act with expediency to take advantage of the low rates and predicted a spike in rates for 2020. We now know that those predictions fell flat in the face of reality. What we were left with was a healthy dose of skepticism about projections for the future of mortgage rates. 

For those who did not finance a home in 2019, it is not all bad news. With 2020 rates remaining low, now is a good time to purchase a new home or refinance your current mortgage loans. Without being too alarmist, it does stand to reason that 2021 rates will not remain as low as those that we have been seeing in 2020. If we have learned anything from 2020 mortgage rate projections, it is that, despite experts' best advice, a prediction can be completely off base. 

Buying a home in the midst of the global Coronavirus pandemic is unsettling for many buyers. Understandable enough. However, when you analyze the current short-term mortgage rate predictions you see that the rates are fairly low and the uncertainty of predictions for the long-term are enough to make many seize the opportunity before them. Buying a home now while interest rates remain low for 2020 is favorable to waiting and taking the risk of buying when mortgage rates are on the incline. 

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