Mortgage rates closed 2020 around the lowest levels on record. But those looking to secure this cheap financing should not wait too long.
The 30-year fixed-rate mortgage averaged 2.67% for the week ended December 31, a basis point from the new 2.66% record low 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 that mortgage product. The 5-year Treasury-indexed hybrid adjustable-rate mortgage fell eight basis points to 2.71%.
“With 2020 ending, we can look back on a year when low mortgage rates served as a powerful fuel, driving activity and offering buyers access to a home,” said George Ratiu, senior economist at Realtor.com.
On more than a dozen separate occasions this year, mortgage rates have dropped to record levels, according to Freddie Mac’s weekly report. In fact, rates have dropped to levels previously considered unfeasible, if not impossible.
But a number of factors can raise rates in the new year. “Compared to the approval of the recently approved COVID-19 relief bill, which markets have been waiting for months, the results of two Senate run-off elections in Georgia and the possibility of further fiscal relief are much less certain to investors’ eyes and therefore can cause sudden movements in bond yields, depending on their results, “said Matthew Speakman, economist at Zillow ZG,
Mortgage rates roughly follow the direction of long-term bond yields, especially the 10-year Treasury bill. “Until we know more about any of these fronts, significant movements in mortgage rates seem unlikely,” added Speakman.
In the long run, the path of the pandemic and the economy will have a major influence on rates. With vaccines being launched, the global community seems ready to start emerging from the pandemic. If this benefits the US economy as expected, rates will certainly increase.
Consequently, most economists have projected an increase in rates for 2021, although they differ on how much the rates will rise.
Whatever the value, rising mortgage rates threaten to make home buying inaccessible at a time when house prices are rising to record levels. “We hope that rising mortgage rates will challenge first-time buyers who are still struggling to find an affordable home, as inventory hits new lows and prices continue to rise,” said Ratiu.