With coronavirus sending the U.S. into a recession and causing record-high unemployment, the Fed set benchmark interest rates near zero to bolster the economy — leading to a mortgage rates drop. Now homeowners and potential buyers want to know: What's the mortgage interest rates forecast? Will rates drop further and is it worth waiting to score an even better deal?
The mortgage rate trend has been a boon for homeowners and would-be buyers. Current homeowners can potentially benefit by refinancing and may save substantially on their home loans. Anyone considering the purchase of a home could also potentially secure a more affordable loan than ever before. While those homeowners interested in further savings may wish to consider mortgage rate forecasts in making their decisions, many others will find that today's rates are so low it's not worth the risk of waiting only to see rates rise.
To decide what's best for you, it can be helpful to explore your mortgage options available based on today's rates. You can visit Credible to easily compare mortgages by rates and loan terms without affecting your credit.
What are today's mortgage rates?
Mortgage rates have already hit historic lows. In fact, the U.S. weekly average mortgage rates were 2.99% for a 30-year fixed-rate loan; 2.54% for a 15-year fixed-rate loan; and 2.91% for a five-year adjustable-rate mortgage as of August 20, according to Freddie Mac.
These rates come on the tail end of a long downward mortgage rate trend, with rates at the same time last year at 3.55% for a 30-year fixed-rate loan; 3.03% for a 15-year fixed-rate loan; and 3.32% for a 5/1 ARM. Mortgage interest rates have repeatedly broken new records as they continued to plunge this year in response to the economic fallout of COVID-19. To see what kind of rates you currently qualify, plug your information into Credible's free online tools.
And while Fannie Mae predicted in mid-July that mortgage rates would fall below 3.0% by the end of the year, that milestone has already been reached as average rates broke the 3% barrier in early August. Yet, even as rates have tumbled, real estate values have largely remained stable, creating an unprecedented refinancing opportunity as well as a chance for well-qualified buyers to save substantially on their home loans.
If you want to take advantage of today's refinance rates, use Credible to compare lenders and see just how much you could save on your monthly payments.
Will mortgage rates keep dropping?
Here's the mortgage rate forecast for remainder of 2020: Several major housing authorities projected that mortgage rates would fall below 3% in August and this prediction has already come to fruition. These trends aren't likely to change any time soon, so many of those same experts believe rates will stay in the sub-3% range throughout the month of August.
(Based on the current rates, it's likely a good time for you to refinance. To see how much you could save on monthly payments today, crunch the numbers using Credible's free online tool.)
Even with today's exceptionally low mortgage rates, there's actually an unprecedented large gap between mortgage interest rates and the 10-Year Treasury Bonds — even though these normally move in lockstep. If mortgage rates followed past trends and this yields gap was narrowed, mortgage rates would actually be even lower than they are now.
However, while there is a real possibility that rates could fall further to close that unusually large divide between the 10-Year Treasury and mortgage rates, there are two factors that could prevent that from happening.
1. Mortgage lenders are being deluged with refinance requests: Mortgage lenders are already seeing unprecedented requests to refinance and cannot handle the current volume, so they have little incentive to reduce rates further. Lenders also rely on investors to purchase mortgage bonds at very low rates in order for consumer mortgage rates to hit rock bottom -- and there hasn't been as much demand due to rising stock prices, as well as fear of defaults or foreclosure due to the economic fallout of COVID-19.
If lender volume eases in the coming months, rates could fall further. And non-bank lenders could also pressure large national banks to begin dropping rates as the big banks aim to prevent wholesale lenders with aggressive pricing from gaining market share.
2. The market is tied to investor sentiment: As of late, the issue top of mind is the response to the coronavirus. If great strides in medical treatment of coronavirus cases is achieved, if a vaccine is developed, or if cases start to fall rather than spike, the trend could reverse and rates could rise.
The upcoming election could also have an impact on rates, which rose after the 2016 election due to markets predicting the Trump administration would be friendly to business interests.
Should you wait for lower rates?
Those waiting for rates to fall further could see their strategy pay off, or could lose out on the chance to secure a mortgage at the current record lows.
Potential borrowers who are uncertain as to how to proceed should visit Credible today to compare current refinance rates and lenders.
Remember to look carefully at terms including mortgage points, mortgage origination fees, and interest rates. More insight into current loan offers could help drive a decision to either apply now or wait for the possibility of a better rate in the future.