Mortgage Interest Rate Trends – Summer Predictions
For homebuyers, the pandemic brought significant relief in the form of historically low mortgage interest rates. According to Freddie Mac, interest rates fell below 3% in May, 2021. This isn’t surprising, as 30-year mortgage rates have remained in the high 2% to low 3% range for the past few months. On June 10, 2021, 30-year mortgage rates dropped .03 percentage points to 2.96%.
Interest rates for other types of mortgages have dropped as well. The current rate for a 15-year fixed-rate mortgage sits at 2.23% with 0.2 points paid. This is down 0.04 percentage points from last week. The current rate on a 5-year adjustable-rate mortgage is 2.55% with 0.2 points paid, a 0.09 percentage decrease from last week.
Although it’s impossible to predict what mortgage rates will do by the end of summer, there are a few factors that could impact rates. Inflation could drive prices up. So could economic growth, as the economy improves.
While some sources believe mortgage rates will continue to drop, this isn’t likely. Instead, mortgage rates will probably start to rise over the summer.
What Factors Impact Mortgage Rates?
Economic and regulatory factors like ten-year Treasury rates, mortgage-backed securities, and Federal rate cuts can all impact mortgage interest rates. Last March, the Federal Reserve announced their plans to keep mortgage interest rates low through 2023.
While Federal rate cuts don’t necessarily mean lower prices for homebuyers, the Feds do have some influence over mortgage interest rates. Purchases of mortgage-backed securities made by the Federal Reserve helps infuse the market with liquidity. This helps push mortgage interest rates down. Rates could continue to decrease if the Feds increase its purchases of ten-year Treasury notes.
Is It a Good Time to Buy?
Homebuyers looking to lock in a good mortgage rate should act soon. As investors grow concerned over inflation, prices may spike. Also important, mortgage seekers should not wait to lock a loan until immediately after a federal rate cut. 30-year fixed rates can spike temporarily following a cut.
Mortgage rates don’t seem to be reacting to economic reports like they normally do. Experts agree that homebuyers should focus on their own needs and not market movements if they plan to buy in the immediate future. Mortgage rates will probably continue to shift and move unpredictably for quite some time.
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