Whether you're looking to buy your first home or refinance your mortgage, it's important to understand where the market is and where it's headed. Why? Because when you're up-to-date on market trends, you're better positioned to save money.
By knowing when the time is right to secure or refinance a mortgage, you can lock in a low interest rate. With many borrowers qualifying for aggressive rates and terms, it's definitely a borrower's market. But that won't be the case for long!
Here is 2021's mortgage interest rate forecast, as well as a peek into 2022 and 2023, which you can use to make informed decisions as to your mortgage or your refi.
2020 Interest Rates
Before we delve into 2021, we must first understand where we're coming from. This helps establish a more accurate baseline and, therefore, more accurately assess what's in store for the future.
So, what did the first quarter of 2020 bring in terms of mortgage interest rates on a 30-year fixed loan? 3.5%, according to the Mortgage Bankers Association (MBA). As the quarters go on, it's easy to see the effects that the coronavirus pandemic had on the market; Q2 saw a drop to 3.2%, Q3, 3.0%, and a shockingly low 2.8% in the last quarter of 2020.
These competitive interest rates brought homeowners out in droves. The sheer volume of mortgage refinancing requests pushed back the overall refi timeline, as lenders were unable to keep up with demand. Even with the long approval times, many are happy they acted when they did.
Where Is the Market Headed?
What's in store for the mortgage market now that the U.S. is getting COVID-19 under control? Interest rates will start to climb at a drastic scale.
The first quarter of 2021 saw only a slight increase from the previous year, with interest rates on a 30-year fixed mortgage at 2.9%. We're well into Q2, and, unfortunately for borrowers, rates saw a sharp increase; 3.4%.
Where does the Mortgage Bankers Association see the market going? Their data anticipates a 3.6% interest rate in Q3 and 3.7% in Q4. Unfortunately, those numbers show no signs of dropping in the near future.
The MBA forecasts 2022 Q1 mortgage interest rates to be 3.9%, 4.1% in Q2, 4.3% in Q3, and ending the year with a shocking 4.4% interest rate. They even provide a glimpse into what's in store for us in 2023. Here's what their data shows for Q4 over a 4-year period:
- 2020: 2.8%
- 2021: 3.7%
- 2022: 4.4%
- 2023: 5.0%
2020 started with an interest rate of 3.5% and it's projected we'll finish 2023 at 5%. That's quite the increase in a relatively short timespan.
Make Your Move
How can this data be interpreted? That if you're thinking about buying a home or replacing your current mortgage contract, now is the time to act! Delaying just a few months could cost you significantly more over the life of your loan.
Ensuring you're prepared for the purchase or refinance process can help get you approved in a more timely manner, which means you can lock in your competitive interest rate that much sooner. Have all necessary documentation ready to go before you start contacting lenders so that when you find favorable terms, you can act fast.
In addition to acting quickly while interest rates are low, it's important to get mortgage or refi quotes from several lenders. By comparing your offers, closing costs, and interest rates, you can ensure you're securing the most competitive deal. Having a few quotes in hand can also help you negotiate your closing costs, so don't hesitate to compare lenders now!
Information Is Power
As we start to bounce back from the destruction that the coronavirus caused, we can expect to see mortgage interest rates bounce back as well. Historically, interest rates trend upwards unless interrupted by a catastrophic event. Then, rates tend to fall, but not for long.
The 2021 mortgage interest rate forecast shows nothing but increases, making it vital to explore your mortgage options now, especially if you're interested in refinancing. An interest rate that's just one percent lower than what you currently pay could save you hundreds of thousands of dollars over the life of your loan.
By keeping up with market trends and interest rate forecasts, you better position yourself to save as much as possible. If you're looking to buy your very first home or refinance your current mortgage contract to one that has more competitive terms, all signs indicate that it's better to act sooner rather than later.
With help from Lendgo, you can connect to a variety of mortgage lenders from the comfort of your home. See what interest rates you qualify for now!