Are Mortgage Rates Going Up in 2021?

2020 brought mortgage rates down to record lows over and over again. Now that the economy is recovering, will mortgage rates soar in 2021?

2020 brought mortgage rates down to record lows over and over again. It led to a booming housing market, with competitive offers due to many taking the plunge and buying because of lower interest rates, remote working, and the need to get out of cities. The question remains, however, are mortgage rates going up in 2021?

Why did mortgage rates fall so drastically in 2020?

Mortgage rates fell in 2020 because of the COVID-19 pandemic and the uncertainty of the economy. While many industries fell into disarray, like tourism and food industries, the housing market boomed. Many Americans realized that they needed more space throughout the pandemic and didn’t want to stay in apartments, condos, or townhomes in such close quarters to other people in cities.

Not only that, even prior to the pandemic remote work was on the rise. Now that we are over 15 months into the COVID-19 crisis, many companies are taking the hint and allowing their employees to work from anywhere in the world—provided they have an internet connection. This has led to a rise in Millennials looking to buy houses for the first time and causing demand to skyrocket, while supply is low.

Mortgage rate predictions for 2021

As the U.S. economy recovers from the pandemic, it is likely that interest rates will go up. Since the beginning of the year, the average 30-year fixed mortgage rate has increased roughly 0.4%, according to Freddie Mac, and could continue to creep higher. Experts say that mortgage rates should rise as Americans continue to get vaccinated, businesses reopen, and statewide restrictions are lifted.

Through June, 2021 mortgage rates have remained relatively flat—though there are a number of factors affecting them, including inflation.

Inflation looks to be growing, which would normally increase rates. But many believe what we’re seeing is only temporary inflation. The economy looks like it has turned a corner and unemployment is going down, but the Federal Reserve wants to keep rates low for the foreseeable future.

As of June, 2021, the average 30-year fixed mortgage rate is 2.99%. It’s unlikely that in the next year the rate will rise to over 4% due to economic uncertainty that still lingers from COVID-19.

Are we going to see another housing market bubble burst like in 2008?

While many see similarities in 2021 with the 2008 housing market crash and proceeding recession, experts say that this is a completely different scenario. Don’t expect prices to crash. The best time to buy real estate is when you need it—that is, don’t try to time the market. At the moment, loans are being given to those with high credit scores, a sizable down payment, and a strong employment history. 2008 saw banks handing out mortgages to people who couldn’t afford them. This is not the case now, as banks have become stricter with mortgage approval because of economic uncertainty.

The bottomline is this: This is not a repeat of 2008, at some point mortgage rates will go up (though most likely not significantly in 2021), and the best time to buy a house is now.

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