The world we live in runs according to a handful of immutable laws. What goes up, must come down. We learned about that one thanks to Isaac Newton and his discovery of gravity. Another rule that is particularly pertinent to home buyers is that all good things must come to an end. This rule is applicable to today’s mortgage rate environment. For the past year, homeowners and buyers saw mortgage rates tumble to historic lows and then hover near there to this day. Unfortunately, it looks like this incredible real estate trend is coming to an end. All indications are that mortgage rates are going to start rising and will continue to rise through the end of this year. The team at People's Choice Mortgage is here to give you the data regarding mortgage rates and what it means for homeowners and home buyers. 

Why Mortgage Rates are Expected to Rise

Mortgage rates are expected to rise as we head into the end of this year. This is mostly thanks to the economy recovering from the novel Coronavirus. It is expected that this rise won’t instantly happen tomorrow but will surely increase as we go through the year. Danielle Hale, a chief economist for realtor.com, says that rates are expected to rise. 

“As the economic outlook strengthens, thanks to progress against coronavirus and vaccines plus a dose of stimulus from the government, this pushes up expectations for economic growth and inflation, driving long-term bond rates higher,” said Danielle Hale. 

The coronavirus vaccine has caused people to get their lives back on track. The CDC announced this week that a mask is no longer necessary in most spaces if you are vaccinated. We are witnessing the economy come back together, and with that also comes rising mortgage rates. Freddie Mac also says that rates are bound to increase. They noted that rates will rise this year, estimating a 30-year fixed budget rate of 3.4% by the end of 2021. Similarly, the Mortgage Bankers Association (MBA) also has reported an expected rise in mortgage rates. They expect it to rise from 3.6% in the 3rd quarter of 2021. These are large jumps. The jumps in percentage are not unexpected, but rather a natural cause of the economy coming back together. It’s best to take advantage of the market now, or get ready for the higher rates in the future. 

Why Low Mortgage Rates are Fantastic for Home Buyers and Homeowners 

Low mortgage rates are great for homeowners and home buyers, alike. Lower mortgage rates can save you money on monthly payments. They can also save you tens of thousands of dollars over the life of your mortgage. For this reason, when rates are low, people want to buy homes. At the same time, when rates are low, homeowners want to refinance their existing mortgage at the lower rates. You should absolutely take advantage of this market if you can. Changes in the future rate will require you to reassess how you budget which can result in not getting your dream home. 

How Will Future Mortgage Rates Stack Up Historically? 

The question of rising mortgage rates may be scary for some homebuyers. Some of you may feel regret about not refinancing your mortgage or capitalizing on that new dream home. However, there is no need to fear. The future is uncertain. We can’t tell if mortgage rates will ever go back down to what they are now, but they are still great rates.

Taking a look at the average historical mortgage rates offered by Freddie Mac, we can see why the market place is still great for homeowners. Mortgages were also hovering at historic lows in 2020, but they were not less than 3% for most of that year. Taking a look at the data, we see that the average rate was 3.11% for 2020. Even if we look at 2010, the average mortgage rate was a whole percentage up at 4.09%. When comparing the two, we can see that mortgage rates have historically been higher compared to the rates we have today. 

Looking back even further reveals even higher rates. In the decade of the 2000s, the mortgage rate was sitting at an average of 6.29%. Going to the 1990s, the rate was averaging at 8.12%. In the 1980s the rate was even more. A percentage of 12.7% was the average. Mortgage rates are still historically low, and the rise of rates in 2021 and 2022 is nothing to worry about. 

Final Thoughts

Even small increases in mortgage rates can add up to thousands of dollars. That’s why if you are thinking of buying a home or refinancing your current mortgage, it is best to act now. Delaying your decision can cost you the opportunity to get lower monthly payments and big savings over the life of your home loan. 

The best thing you can do is contact us and try one of our complimentary mortgage qualifiers. This will tell you exactly how close you are to buying a home of your own. However, if you do not qualify for a mortgage today, there is no need to fret. At People’s Choice Mortgage we believe that everyone deserves the right to own a home. Just because you do not qualify today, it does not mean that you cannot qualify in the future. Based on what we learn about your financial situation from our complimentary mortgage qualifier, we can help you. We will craft a plan that will put you on a path to homeownership. 

While it is likely that today’s mortgage rates will be gone, tomorrow’s mortgage rates will still be favorable from a historic perspective. Remember, your average mortgage rate was over 12% during the 1980s. No matter what rate increases are in store for us this year, they will be a huge discount compared to previous years. So, while the window is closing for this year’s historic discounts, buying a home is still a viable option. It is still financially prudent to buy a house or refinance your mortgage a few months down the road. Contact us today so that we can help make your dream of owning a home a reality.