Where Are Mortgage Rates Heading in December and Beyond

Mortgage rates are at or near historic lows.  What is the forecast for December and early 2021?

▪ Americans have more clarity today than they did just a few weeks ago. For proof, consider that there will be a new president and administration come January. And coronavirus vaccines appear to be coming soon. These developments, in particular, could make it easier to forecast mortgage rates in the weeks ahead.

▪ Then again, many uncertainties cloud even the brightest industry minds. Will there be another stimulus package anytime soon? What about the near-and long-term effects of pandemic shutdowns and disruptions? Who will control the Senate next year?

▪ Where mortgage rates are headed in December?  Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors expects slightly higher rates in December, hovering around 2.9 percent for the benchmark 30-year fixed mortgage rate.

▪ Greg McBride, CFA, chief financial analyst for Bankrate, anticipates rates remaining at or near November lows for the remainder of 2020.  He says, “While there is great excitement about vaccines becoming reality in the months ahead, the virus is currently raging more than ever and there is no sign of more stimulus,” he says. “These are immediate risks to the economic recovery and will keep mortgage rates in check through the end of the year.”

▪ Jeremy Sopko, CEO of Nations Lending in Independence, Ohio, wouldn’t be surprised if rates hit 3.25 percent over the last five weeks of the year. “The Fed has committed to keeping interest rates low, but with a vaccine on the horizon that’s reportedly upward of 95 percent effective, a potential second consumer stimulus, and given the fact that rates simply can’t go much lower than they already are now, I think we’ve got nowhere to go but up,” says Sopko.

▪ What about mortgage rates beyond December?  Many foresee rates creeping northward after the turn of the year for various reasons.

▪ “I expect rates to begin rising shortly after the presidential inauguration – modestly at first, maybe one-quarter of a point, but going higher overall in 2021, especially as it becomes clear that the vaccine rollout is proceeding as planned,” says Chuck Biskobing, senior closing attorney with Cook & James in Atlanta.

▪ Evangelou expects rates to hike no higher than 3.1 percent in the first quarter of next year.  “The main reason is the latest positive news on COVID-19 vaccines, which will likely begin to be delivered at the beginning of 2021,” she adds.

▪ Any increase in rates in the coming year “will be tempered by the accommodative Federal Reserve and demand from overseas investors,” says McBride.

▪ Prominent real estate organizations echo these rate predictions in their latest forecasts. Fannie Mae, for instance, expects the 30-year fixed rate to settle in at 2.8 percent between now and the end of next year. The Mortgage Bankers Association, by contrast, predicts a 2.9 percent average rate in December followed by an uptick to 3.3 percent, on average, across 2021. And Freddie Mac says we can likely count on an average rate of 3 percent over the next 13 months.

▪ Undecided about your next mortgage loan move? You may want to act fast before your opportunity to claim a near-record low rate evaporates, provided you are in a strong financial and employment position.


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