Mortgage interest rate forecast for August 2021

Summer Dog Day has officially arrived. However, while temperatures could rise in most parts of the country in the coming weeks, mortgage rates are unlikely to rise. Of course, this is good news for many potential buyers and homeowners looking for a purchase loan or refinance.

Mortgage rates remain near their historic lows and recently fell to their lowest levels since last winter. The 30-year fixed-rate benchmark mortgage remained at 3% towards the end of July, with a 15-year fixed rate of around 2.3%.

As with the weather, the situation can change quickly, for better or for worse. So what’s the best strategy for anyone looking for a mortgage? Check to lock now or see if the charges are a few pages off the calendar. It depends on your goals, your schedule and your financial outlook.

August Mortgage Interest Rate Outlook

Interest rates fell surprisingly in July, exciting many potential borrowers. Many were also surprised that the Federal Housing Finance Agency (FHFA) abolished the 0.5% fee for refinancing the Fannie Mae and Freddie Mac loans on August 1.

“Mortgage rates are likely to rise in the next few months, but don’t expect them to skyrocket in August,” said senior economist and director of forecasts for the American Real Estate Agents Association in Washington, DC. Nadia Evangelow said. “Mortgage rates are expected to change little in August and stay around 3% as most economic indicators start to normalize.”

Chuck Biskobing, senior attorney for Atlanta-based Cook & James, agrees.

“For a 30-year mortgage, we expect interest rates to be almost stable around 3% next month. Given the recent surprisingly high jobless claims, interest rates could rise significantly. I think it’s low, ”he said. “Monthly inflation is a bit of a wild card, but overall I think interest rates will stay at current levels for the foreseeable future.”

Indeed, inflation and economic growth are currently the most important variables, said Greg McBride, chief financial analyst at Bankrate.

“Ironically, both have led to lower long-term interest rates, but a gradual decline in bond purchases from the Federal Reserve will cause mortgage rates to rise this month,” McBride added. .. “It is not yet clear how the debate over whether inflation is temporary or persistent will be resolved, but these temporary factors incorporate higher inflation. If this leads to evidence that it does, we know that interest rates will skyrocket. “

George Raitu, senior economist at Realtor.com, said in a recent statement that homebuyers “continue to suffer from high prices, tight inventories and rising inflation, which is taking a heavy toll on their monthly wages.” . Declared. At today’s rates, median monthly mortgage payments are $ 109 higher than at the same time in 2020. ”

Prices after fall 2021

Industry experts predict significant fluctuations in mortgage rates today at the end of the year. Fannie Mae projects an average of 3% fixed rate mortgages over 30 years by the end of 2021, close to Freddie Mac’s forecast of 3.1%. The Mortgage Bankers Association predicts that by the end of 2021, the average annual interest rate will be 3.4%.

“Moderately high mortgage rates are the most likely outcome, especially since sustained inflation is of greater concern. But luckily, on average, mortgage rates in the top three and commercial mortgage rates under 3% of those that do are still predominant, ”McBride said.

Biscobbing warns that continued inflation could force the Fed to withdraw its asset purchase program and that interest rates could rise faster than expected.

“But I think the inflation we’re seeing is probably closely linked to supply chain issues related to COVID shutdowns. These issues should be addressed in the next few months. Still, I think 30-year mortgage rates are on the rise and could approach 3.5% by the end of the year, ”he said.

This is exactly what Evangelow envisions for the New Year.

“As work returns in force, we can also see many college campuses preparing to welcome students in the fall. As a result, millions of students are looking for housing quickly and this will further increase the demand for rental housing, ”she said. “Remember that rent is a major component of inflation and represents over 40% of core inflation. “

If the vaccination progresses slowly and the number of coronaviruses increases, the tip rate could drop slightly in the coming months.

“Concerns about increasing Delta Variant cases could reduce both Treasury yields and mortgage rates over a 10-year period,” Evangelou said. Treasury rates and mortgage rates are closely related to each other.

On the flip side, additional congressional spending could push mortgage rates up as the market raises interest rates ahead of federal action.

“Parliamentary infrastructure spending is fueling the fire of inflation, but we still don’t know if it’s enough to force the Fed to act,” Biskobing said.

Now is the time to get a mortgage

Now is the perfect time to take advantage of relatively low mortgage rates. The question is, can your wallet support the monthly payments required to pay the average asking price for a house?

“Despite these historically low rates, many first-time buyers have been reduced. Inventory is especially limited in the Starter Home price range ($ 270,500), but first-time buyers and all. The affordable gap between buyers is 34%, which makes home purchases even more difficult, ”explains Evangelou.

Biskobing says there are no easy answers for many.

“Buying a home now is a tough choice. It seems reasonable to get a cheap mortgage loan now, as the prices are likely to be higher in the future. Yet are house prices the highest on record? It’s close to that, and construction costs continue to rise, ”he says. “The question is, do you want to wait until house prices and material costs go down, do you risk getting a higher interest rate mortgage, or do you want to fix it now and not worry too much?” purchase prices? That is to say. “

However, when it comes to refi, the experts will give the green light.

“Gold refinancing opportunities have been around much longer than expected, but don’t tempt fate. Where possible, we will set fixed rates below 3%, ”says McBride. “Reducing mortgage payments significantly is especially helpful because it increases the cost of many other household items. ”

Industry experts predict mortgage rates will be slightly higher by the end of the year.

Will the price finally start to increase?


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