Tami Savage, Realtor

Your Key to a New Lifestyle

  • Search for Homes
  • Blog
  • About
  • Contact
  • Facebook
  • Instagram
  • LinkedIn
  • YouTube

The Reason Mortgage Rates Are Projected to Increase and What It Means for You

February 23, 2021 By Tami Savage

The Reason Mortgage Rates Are Projected to Increase and What It Means for You

We’re currently experiencing historically low mortgage rates. Over the last fifty years, the average on a Freddie Mac 30-year fixed-rate mortgage has been 7.76%. Today, that rate is 2.81%. Flocks of homebuyers have been taking advantage of these remarkably low rates over the last twelve months. However, there are no guarantee rates will remain this low much longer.

Whenever we try to forecast mortgage rates, we should consider the advice of Mark Fleming, Chief Economist at First American:

“You know, the fallacy of economic forecasting is don’t ever try and forecast interest rates and/or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”

Many things impact mortgage rates. The economy, inflation, and Fed policy, just to name a few. That makes forecasting rates difficult. However, there’s one metric that has held up over the last fifty years – the relationship between mortgage rates and the 10-year treasury rate. Here’s a graph detailing this relationship since Freddie Mac started keeping mortgage rate records in 1972:

For almost 50 years, the 30-year mortgage rate has moved in unison with the 10-year treasure rate. Average spread = 1.7. Source: Freddie Mac, Macrotrends

There’s no denying the close relationship between the two. Over the last five decades, there’s been an average 1.7-point spread between these two rates. It’s this long-term relationship that has some forecasters projecting an increase in mortgage rates as we move throughout the year. This is based on the recent surge in the 10-year treasury rate shown here:

10-Year Treasure Rate Moving Upward from 0.68 in October 2020 to Today at 1.29. Source: Macrotrends

The spread between the two is now 1.53, indicating mortgage rates could rise. Actually, a bump-up in rate has already begun. As Joel Kan, Associate VP of Economic Forecasting for the Mortgage Bankers Association, reveals:

“Expectations of faster economic growth and inflation continue to push Treasury yields & mortgage rates higher. Since hitting a survey low in December, the 30-year fixed rate has slowly risen, & last week climbed to its highest level since Nov 2020.”

How high might they go in 2021?

No one knows for sure. Sam Khater, Chief Economist for Freddie Mac, recently suggested:

“While there are multiple temporary factors driving up rates, the underlying economic fundamentals point to rates remaining in the low 3% range for the year.”

What does this mean for you?

Whether you’re a first-time buyer or you’ve purchased a home before, even an increase of half a point in mortgage rate (2.81 to 3.31%) makes a big difference. On a $300,000 mortgage, that difference (including principal and interest) is $82 a month, $984 a year, or a total of $29,520 over the life of the home loan.

Bottom Line

Based on the 50-year symbiotic relationship between treasury rates and mortgage rates, it appears mortgage rates could be headed up this year. It may make sense to buy now rather than wait.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Free eGuide. Things to Consider When Buying a Home. Send me this eGuide.

Free eGuide. Things to Consider When Selling Your House. Send me this eGuide.

A Guide to Buying Your First Home. Send me this eGuide.

Tags

Baby Boomers Buying Myths Community Demographics Distressed Properties Down Payments First Time Home Buyers Forbearances For Buyers Foreclosures For Sale By Owners For Sellers FSBOs Garden Generation X Generation Z Gen X Gen Z Holidays Home Home Trends Housing Market Updates Infographics Interest Rates Interview Investors Lifestyle Luxury Market Millennials Move-Up Buyers moving New Construction Pricing relocation Remodel Rent vs Buy Report Reviews Selling Myths Senior Market Short Sales SOLD Tax Refund Veterans Video

About Me

I help homeowners sell their existing home and shift into a home more suitable to their needs in the North Metro Atlanta area (specifically around Cumming, Canton, & Milton). Read More…

Let’s Connect

770-744-2524‬ or
(888) 959-9461 x2543

Digitial Business Card

 

  • Email
  • Facebook
  • Instagram
  • LinkedIn
  • YouTube

Calculate Mortgage Payments

Below is a mortgage calculator you may use to help give you an estimate on your monthly payment and other details.

Once calculated, next to the monthly payment on the far right is a small graphic you can click on to see the payment schedule.

Calculate Mortgage Payments

www.mlcalc.com
Copyright © 2019+ Tami Savage LLC. All Rights Reserved. Privacy Policy

DISCLAIMER: The information contained, and the opinions expressed, on this site are NOT intended to be construed as legal or financial advice. Tami Savage does NOT guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as legal or financial advice. You should ALWAYS conduct your own research and due diligence and obtain professional advice before making any legal or financial decisions. Tami Savage will NOT be liable for any loss or damage caused by your reliance on the information or opinions contained herein.