If you are thinking of getting a mortgage, you may worry that mortgage interest rates may rise in August after falling steeply since the onset of the pandemic. The good news is that experts expect the levels to stay at or close to historic levels in August 2020.
“Mortgage rates are likely to remain at record lows in August and for the foreseeable future, given the weak economic background. The uncertain nature of the coronavirus and the likelihood of a long-term economic recovery will keep the lid on mortgage rates, “says Greg McBride, CFA, chief financial analyst.
Mortgage rates have continued their downward trend since the start of the COVID-19 crisis months ago. The average yield on the 30-year fixed-rate mortgage fell in the last week of July to a new record of 3.30 percent, based on the weekly Bankrate survey of large lenders. A year ago, the 30-year-old was 3.97 percent. The average 30-year fixed rate for the week is 0.67 percentage points below the 52-week high of 3.97 percent.
Where mortgage rates are headed in August
Attitudes are unlikely to rise or fall much in the near future, approvals agree.
“While some slight daily changes can be expected, there should be little change in the 30-year fixed-rate mortgage rate in August. Continued demand for 10-year Treasury securities – the anchor for long-term mortgage rates – will serve to keep rates moving around plus or minus 3 percent, “says Ken H. Johnson, a real estate economist with Florida Atlantic University in Boca Raton, Florida.
Logan Mohtashami, a County, California-leading analyst at HousingWire, echoes these thoughts.
“The 10-year yield refuses to break below 0.62 percent at any rate,” Mohtashami says. “But we have two factors that can only push rates down: if the government’s catastrophe relief is not big enough, and if some of the recent economic gains are lost. Also, if this second increase in coronavirus cases worsens, it will make the 10-year yield break down. “
Indeed, the longer our nation passes without an effective COVID-19 vaccine, the more insecure our economy becomes and the more likely it is that rates will stay flat or fall even further.
“How we manage the pandemic will be a key factor in what mortgage rates go into in the long run,” Johnson says. “With a combination of vaccines and effective treatments, the impact of the virus on the economy will be less and, all others being equal, rates need to remain stable.”
Upcoming elections may change issues faster than expected, too.
“I expect the 30-year level to drop below 3 percent in August, as the election cycle will have traders nervous enough that you will see extra money flowing into bond properties, driving rates down,” says Derek Egeberg. , producing the branch manager for the Academy Mortgage Corporation in Yuma, Arizona. “I predict rates will remain lower until the end of the fourth quarter and until gains for this year’s holiday season are reported and the election cycle is over.”
Mortgage rates beyond August
The Mortgage Bankers Association predicts that the 30-year fixed rate should remain relatively unchanged over the next five months, averaging 3.3 percent for 2020 and going up to 3.5 percent in 2021. Freddie Mac expects rates to remain low, dropped to an annual average of 3.4 percent this year and 3.2 percent in 2021. Meanwhile, Fannie Mae predicts rates would fall to 3.0 percent in the third and fourth quarters of 2020 and plunge to 2.8 percent a year from now.
Forecasting the rest of the year and until 2021, McBride believes the path of mortgage rates will be dictated by the way the economy makes prices, the ongoing stimulus measures by the Federal Reserve and the inflation outlook.
Act soon on a new mortgage or refinancing, the expert advises
Egeberg is convinced that now is the ideal time to buy or refinance a home.
“Similar to our grandparents asking why they did not buy more homes 50 years ago when prices were cheaper, our children will ask us about the ‘Big Interest Rate Fall’ of 2020 and whether we would be able to to capitalize on these historically low rates, “he says. “This is the single biggest purchase option for our lives because of how affordable the debt payment is, the current interest rate environment.”
However, before rushing into a decision, do your homework first; dial the numbers and make sure you can afford the monthly payments.
“Instead of taking the time to buy a home based on low mortgage rates, it ‘s better to make sure your finances are in good shape before they sink,” says McBride. “Work to improve your credit score by paying off debt and boosting savings. These steps will make you better prepared for successful home ownership, whether your rate is 2.5 percent or 3.5 percent.”
Photo by Wolfgang Kaehler / LightRocket via Getty Images.
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