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Where do mortgage interest rates stand today, and where are they expected to be in 2021, which is only a few weeks away? This article will clarify the state of mortgage rates to help you determine if now is a good time to buy.
Mortgage rates for 30-year fixed-rate mortgages continue to stay near historic lows as the year gets underway. And with news of the coronavirus spreading, rates have fallen even further and may even be expected to stay lower than initially anticipated throughout the year.
According to Freddie Mac’s weekly mortgage rate survey of more than 125 banks nationwide, the average 30-year fixed-rate mortgage rate is now 2.920% as of the second week of December 2020.
The rate is available to conforming, prime borrowers willing to pay an accompanying 0.7 discount points plus a full set of closing costs. A “prime” mortgage applicant typically has excellent credit, verifiable income, and at least 25% equity in their home.
And it’s not just the 30-year fixed-rate mortgages that continue to stay low, either. The 15-year fixed-rate mortgages did, too, now sitting at 2.390%. The 15-year fixed-rate mortgage also requires 0.7 discount points plus closing costs. And the 5/1 ARM rate is currently 3.01%.
Discount points are a one-time, up-front closing cost, based on loan size. If your loan requires 1 discount point, that means that your loan has a closing cost equal to 1 percent of your loan size. If your loan requires two discount points, the fee would be equal to two percent of your loan size, and so on.
That said, a prime example of how discount points can affect your home loan is if a home buyer in Bellevue, opening a $200,000 mortgage and paying 0.7 discount points, would face a one-time $1,400 fee to be paid at closing.
Overall, discount points are not all doom and gloom as they are optional. To avoid paying discount points, simply ask your lender for a “zero points” loan. You’ll get a higher mortgage rate than what Freddie Mac shows in its survey, but you’ll pay fewer closing costs.
Today’s low rates are terrific for both home buyers and existing homeowners looking to make a refinance. As compared to last year at this time, mortgage rates are down by 95 basis points — nearly one full percentage point.
Currently, based on this week’s Freddie Mac survey, despite historically low rates, home sales have become stagnate. However, home sales typically slow down during the winter months and the holiday season.
And According to Fannie Mae, 30-year fixed-rate mortgages will remain low as we head into the new year at 2.8% and only rise to 2.9% in 2022.
Fannie Mae Chief Economist Doug Duncan also noted that “the GSE’s November forecast calls for $4.12 trillion in mortgage originations this year, up from $4.08 trillion in the October outlook. For 2021, the latest projections call for $2.72 trillion in volume, up from the $2.62 trillion that was previously predicted.”
In 2020, we saw the total home sales increase by 5.7% as compared to 2019. This translates roughly to 6.37 million units on a seasonally adjusted annual rate basis, according to Fannie Mae.
Furthermore, total home sales are expected to increase by 0.8% in 2021, and new-home sales will be up by 6.2%. However, Fannie Mae predicts that existing-home sales will likely remain flat.
In contrast, the Mortgage Bankers Association (MBA) is looking at 2021 more conservatively and predicts that 30-year fixed-rate mortgages will rise to 3.3%. Likewise, the MBA predicts there will also be an increase in 2022 to 3.6%.
Having said that, at the end of the day, mortgage rates are unpredictable, so there’s no guarantee that low rates will last forever. Plus, mortgage rates could start rising with a Coronavirus vaccine. In fact, many analysts believe that if and when the U.S. government approves the Pfizer vaccine, we will see an increase in mortgage rates, which would more than likely exacerbate an already expensive housing market. As a result, purchasing a home now will allow you to take advantage of the current historically low rates and not have the rug pulled out from under you in the event that there is an increase in mortgages once the vaccine is approved. So, if today’s rates meet your household budget, you should consider locking something in.
If you need the assistance of a seasoned mortgage professional, Sammamish Mortgage can help. We are a local, family-owned company based in Bellevue, Washington. We serve the entire state, as well as the broader Pacific Northwest region that includes Idaho, Colorado, and Oregon. We offer a wide variety of mortgage programs and products with flexible qualification criteria. Please contact us if you have mortgage-related questions.
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