If you are thinking about getting a mortgage, you may be concerned that mortgage interest rates may rise in August after falling sharply since the start of the pandemic. The good news is that experts expect rates to stay at or near record lows in August 2020.
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Mortgage rates in August
“Mortgage rates are likely to remain at record lows through August and for the foreseeable future, given the weak economic environment. The uncertain nature of the coronavirus and the likelihood of a long economic recovery will keep mortgage rates capped,” says Greg McBride , CFA, chief financial analyst at Bankrate.
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Mortgage rates have followed their downward trend since the COVID-19 crisis began months ago. The average yield on the benchmark 30-year fixed-rate mortgage fell in the last week of July to a new record low of 3.30 percent, according to Bankrate’s weekly survey of major lenders. A year ago, age 30 was 3.97 percent. The 30-year fixed-rate average for the week is 0.67 percentage points below the 52-week high of 3.97 percent.
Where are mortgage rates heading in August
Rates are unlikely to increase or decrease much in the near future, professionals agree.
“While a slight daily change can be expected, there should be little change in the fixed 30-year mortgage interest rate in August. Continued demand for 10-year Treasuries, the anchor for long-term mortgage rates It will serve to keep rates hovering around 3 percent, “says Ken H. Johnson, a real estate economist at Florida Atlantic University in Boca Raton, Florida.
Logan Mohtashami, a senior analyst for HousingWire located in Orange County, California, echoes those thoughts.
“The 10-year yield refuses to break below 0.62 percent with any kind of speed,” says Mohtashami. “But we have two factors that could drive rates down a bit: if government disaster relief is not big enough and if some of the recent economic gains are lost. Also, if this second surge in coronavirus cases it gets worse, it will make the 10-year yield go down. “
In fact, the longer our nation goes without an effective COVID-19 vaccine, the more uncertain our economy will become and the more likely it is that rates will remain stable or fall further.
“How we handle the pandemic will be a major factor in the fate of long-term mortgage rates,” says Johnson. “With a combination of effective vaccines and treatments, the impact of the virus on the economy will be less, and other things being equal, rates should remain stable.”
The upcoming elections could also alter matters earlier than expected.
“I expect the 30-year rate to drop below 3 percent in August, as the election cycle will have enough nervous traders to see additional money flowing into bond holdings, which will drive rates downward,” says Derek Egeberg, production branch manager for Academy Mortgage Corporation in Yuma, Arizona. “I anticipate that rates will remain lower until the end of the fourth quarter and until earnings 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 for the next five months, averaging 3.3 percent by 2020 and rising to 3.5 percent in 2021. Freddie Mac expects rates to hold. declines, falling to an annual average of 3.4 percent this year and 3.2 percent in 2021. Meanwhile, Fannie Mae predicts rates will drop to 3.0 percent in the third and fourth quarters of 2020 and drop to a low of 2.8 percent. hundred a year from now.
With a forecast for the rest of the year and until 2021, McBride believes that the path of mortgage rates will depend on how the economy fares, the Federal Reserve’s ongoing stimulus measures and inflation prospects.
Act soon on a new mortgage or refinance, advises an expert
Egeberg is convinced that right now is the most ideal time to buy or refinance a home.
“Similar to asking our grandparents why they didn’t buy more houses 50 years ago when prices were cheaper, our children will ask us about the ‘Great Interest Rate Decline’ of 2020 and if we could capitalize on these historically low rates. , ” he says. “This is the biggest buying opportunity of our lives because of how affordable debt payments are in today’s interest rate environment.”
However, before rushing to make a decision, first do your homework; Reduce the numbers and make sure you can afford the monthly payments.
“Instead of scheduling a home purchase based on low mortgage rates, it’s better to make sure your finances are sound before you take the plunge,” says McBride. “Work to improve your credit score, pay off debts, and increase savings. These steps will better prepare you for successful home ownership, regardless of whether your rate is 2.5 percent or 3.5 percent.”
Photo by Wolfgang Kaehler / LightRocket via Getty Images.
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