2021: You did not miss the boat on Rock Bottom Mortgage Rates

Dear friends,

Heading into the very early part of 2021, if you find yourself looking to buy a new home or refinance your mortgage, rest assured… you did not miss out on the rock bottom mortgage rates that existed for most of 2020, at least for the time being. 

When it comes to predictions and forecasts regarding the future of the economy and interest rates, there are plenty of economists and average Joe’s out there who are willing to share an opinion.  Although, the economists are paid to make forecasts, they’re not always correct.  Some have better track records than others, and some average Joe’s might be just as good at predicting the future of the economy as the high priced economist?  Regardless, no one has a crystal ball.  Over time, even the best are not consistently correct.  In fact, in July of 2020, the MBA’s (Mortgage Banker Association’s) research team predicted that 30-year loan rates would average in the 3.2% to 3.3% range in the last 2 quarters of 2020 (*).  Thus, even the Mortgage Bankers’ Association was off in their short term forecast by at least 0.5% as we saw 30-year rates remain in the 2.625% to 2.875% range for the 720+ credit score borrowers. 

As we head into 2021, we see mortgage rates holding steady in the 2%’s.

Having graduated with an economics degree from Grand Valley State University, and as mortgage banker with over 30 years of experience, I have always paid close attention to the movements in mortgage rates (and the potential future movement of mortgage rates). It has been part of my job to do so as I am asked about mortgage rates almost daily, and to give my “average Joe” opinion. My responses to these questions of forecasting rates have always been simple. That is: “Whatever causes inflation will normally cause interest rates to hedge up, and vice versa.”  Hey, I said it was simple, didn’t I? But, I do go into a little further explanation from there; and that is essentially:  what is good news for the economy is bad news for interest rates, and what is bad news for the economy is good news for interest rates.  With that being said, I usually give some examples.

My 3 Month Forecast

With the all of the very unfortunate, economic destruction caused by Covid-19, we should see mortgage rates stay low until more businesses open again, and the economy gets back to more of a normal sense. This might not be until most people are of the opinion that the vaccines to Covid are working well, and that the vaccines are being widely administered? Until that time, the Federal Reserve is likely to continue buying mortgage backed securities, keeping mortgage rates low to inject liquidity into the economy, and to keep the housing market robust. There are always international developments that can arise which cause interest rates to rise or fall. There can also be governmental fiscal policy decisions that are designed to spur economic growth but are viewed to be inflationary, which could cause interest rates to hedge up. But, basically, there is no true crystal ball. What we do know is that mortgage rates are truly at historic lows going into 2021. We don’t know what the rest of the year holds, but at least for the near term, we will see extremely low rates throughout the first quarter of 2021. So, how’s that going out on a limb for a 3 month forecast!

With rates still in the 2%’s, right now is still a great time to buy or refinance. I have been very fortunate and blessed in the mortgage industry throughout my career, but especially in 2020, being able to close purchase loans and refinances for my clients at such rock bottom rates. Starting 2021, I am grateful to be rested and ready to build back up my pipeline, offering the same service and low rates that people have come to expect from me and my team. I appreciate everyone reading this for your past business, your referrals, and so much more than you know. I am hopeful for many things, but here are two of them as I conclude: (1) for your continued referrals that keep me in business, and mostly (2) that the Covid-19 virus is brought under control to the point of polio, small pox, and other viruses that have been brought under control in our history. This mortgage banker for one would be very happy with a much higher interest rate, but a Covid free environment, opposed to what we experienced in 2020. I am available for refinances and pre-approvals now!  Friend’s, let’s say good riddance to 2020, and welcome in 2021.