Mortgage rate outlook for May 2021: Recent lower rates do not hold

Mortgage rate forecast for May 2021: Recent lower rates do not hold up

Business News: Mortgage rate outlook for May 2021: Recent lower rates do not hold.

The upward trend in mortgage and refinancing rates is likely to continue in the coming months. “Our long-term vision for mortgage rates in 2021 is higher,” says Danielle Hale, chief economist at “As the economic outlook strengthens, thanks to progress against coronavirus and vaccines plus a dose of stimulus from the government, this pushes up the expectations of economic growth and inflation, pushing up the rates of long-term bonds “.

And long-term Treasury bill rates are a key indicator for mortgage rates. The yield on 10-year Treasuries bottomed out in August 2020 and climbed to more than 1.7% in March 2021. “Mortgage rates have returned to decline while bond yields have risen as they have never been adequately evaluated during this crisis. However, we are moving closer to a traditional relationship with bonds and mortgage rates, ”says Logan Mohtashami, HousingWire’s housing data analyst. raise mortgage rates.

“Investors realize that inflation will not be a problem in 2021 and it will not cause the Fed to reevaluate its approach to low rates anytime soon,” Evangelou says. Evangelou believes the economy is at a tipping point, with anticipated strong growth in early hiring due to rate hikes of another kind: increased vaccinations and policy support. For these and other reasons, he expects the 30-year mortgage rate to rise in May, ending at around 3.1% before the calendar shifts to June.

Bankrate chief financial analyst Greg McBride, CFA, adheres to this theory. “Much of what we’ve seen in terms of better economic data and higher inflation has already been discounted, as evidenced by rate stabilization and even retreat in the face of some really strong economic numbers,” says McBride. “Even if mortgage rates resume their upward movement in the coming weeks, it will be much more modest than what we saw earlier this year.”

The exact time when we might see rates start to rise and how much they will rise depends on a few factors. How we are able to deal with the pandemic and its impact on the economy is the main thing to pay attention to. But other factors, such as inflation and the Federal Reserve’s desire to keep rates low, will also affect mortgage rates.

What may seem like a small fee increase can have a big impact on your bottom line. We have already seen rates rise by around 0.5% since the beginning of the year. For a 30-year $ 300,000 home loan, that growth increased the monthly payment on that type of loan by $ 81. Over the life of the same loan, that extra 0.5% will cost you more than $ 28,000. additional interest, according to NextAdvisor’s mortgage calculator.

“Mortgage rates are more likely to rise than fall for the rest of 2021,” says Evangelou. “The economy is growing faster than expected as Americans get vaccinated and resume traveling. As consumers spend more, prices rise, putting upward pressure on tariffs. “

It expects mortgage rates of 3.5% on average by the end of the year. This is close to the forecasts of other widely observed real estate organizations. Fannie Mae and Freddie mac expects the 30-year fixed mortgage rate to average 3.2% in 2021. The Mortgage Bankers Association expects rates to rise to 3.7% by the end of the year.