At the start of the pandemic, mortgage rates fell to historic lows. However, amid the coronavirus vaccine rollout and business reopening, those historically low interest rates will rise again.
In fact, most of 2021 has so far seen a rising mortgage interest trend, leaving many home buyers wondering if it is still possible to get a good interest rate on a home loan. Fortunately, the mortgage market is still in great shape — even for first-time home buyers — compared to pre-pandemic times, meaning mortgage refinancing is still viable options for saving money on monthly payments.
Here’s what you need to know about how current housing market mortgage rates are expected to change before getting started with the refinancing process. If you are ready to explore your loan options, visit Credible to compare rates and lenders in just a few minutes.
What factors influence the mortgage interest rate?
When discussing the various factors affecting current mortgage rates, none is more important than the 10-year Treasury yield. Simply put, government bonds are often seen as safe investments because they are backed by the US government.
As such, they are seen as a gauge of investor sentiment. High demand is a sign that the economy is moving and investors are looking for a safe place to invest. When demand rises, interest rates fall because the government pays less for the bonds they sell.
Government bond yields are typically very closely linked to mortgage rates and can be used as an indicator of how interest rates will change in the future and, by extension, when it is a good time to refinance.
Other economic factors that can affect how the Federal Reserve sets interest rates include unemployment, inflation and current real estate conditions. All these factors together make it easy to see why the interest rate hikes have been observed as the economy begins to recover.
If you think now is the right time to refinance, use a online mortgage savings calculator to see how much you can save on your mortgage payments.
What will the mortgage interest rate be for the rest of 2021?
Now that you know more about forecasting mortgage rates, it’s time to take a closer look at how they will change in 2021. As the economy continues to recover and stabilize, they are likely to rise in the near term. In the longer term, the Federal Reserve has announced that they plan to keep rates low until at least 2023.
“I tell buyers not to panic. An increase in rates should not deter them [from refinancing] right now, says Beatrice De Jong, consumer trends expert at Opendoor. “Home buyers have been able to take advantage of abnormally low interest rates in recent years. But in the late 1990s, the average interest rate was as high as 6%, and it’s important to remember that in the 1990s, people were still buying homes, taking advantage of the increase in home value.
However, despite the wise words of many experts, the rise in interest rates has led to a slump in refinancing applications. According to the latest weekly survey of The Mortgage Bankers Association (MBA), the refinancing index is down 1% in the past week and down 18% from the same week last year.
What you can do to get a favorable rate
Rising mortgage rates are to be expected as the economy recovers. However, that doesn’t mean you can’t get decent refinancing rates. In this case, it is important to focus on personal financing methods to ensure that you access a good interest rate.
Improving a bad credit score and building credit can help you get a lower rate, as those with higher credit scores often get the best rates than those with lower scores. On the other hand, it can also be beneficial to choose a 15-year mortgage over a 30-year mortgage, as mortgage lenders are often willing to give you a lower interest rate in exchange for a faster repayment.
A online mortgage broker like Credible can help you get personalized pre-approval letters and rates without impacting your credit score.
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