No doubt, 2020 has been an unpredictable year. The outbreak of Covid-19 affected every field at large, be it political, social, financial, religious, or economic. Studies show that within a week, 3.3 million people applied for unemployment. Another week later, 6.6 million people started searching for jobs in America.
Based on this scenario, everyone is looking out for mortgage rates predictions for 2021. Keeping in mind that one of the biggest reasons mortgage rates will fall in 2021 is Covid-19.
Let’s have a look at some reasons I think the mortgage rates will fall in 2021.
As mentioned earlier, the covid-19 pandemic will have a significant role in mortgage rates predictions for 2021. Various experts believe that the rates will remain low without an approved vaccination, and the Covid-19 fallout will continue.
How Can the Economy Get Better?
Although they are optimistic for the economy to get better in the other half of 2021, the pandemic has almost seized consumer spending. The business investment and the apparent increase in the number of infected people are another reason mortgage rates will fall in 2021.
The Disaster Relief Fund
The distribution of disaster relief to financially distressed people facing unemployment or other such issues has turned out to be fruitful to a vast extent. Yet, the reason is not reliable enough to predict a rise in mortgage rates in 2021.
Mortgage Interest Rates Today
One of the most important reasons for the downfall in the rates is the mortgage interest rates today.
Statistical View on Interest Rates
The average 30-year fixed mortgage rate raised one basis point to 3.04% from a week ago. The 15-year fixed mortgage rate raised one basis point to 2.47% from a week ago. When the economy is endangered and the bond yield is continuously decreasing, increasing rates seize the mortgage industry’s rise in 2021. Experts have conditioned the increment in mortgage rates to better the economy and rise bond yield.
According to another study carried out on Sep 18:
In the United States, interest rates for all mortgage types decreased between the fourth quarter of 2019 and the first quarter of 2020. The federal funds lowered the grades to boost home sales and the American economy back then. Until and unless the reinforcement of this decrement happens, the mortgage rates will stay low.
The Political Situation
I have always believed, and I will repeat it; leadership matters. Experts have predicted that the disaster relief fund is linked with elections.
Why? Here is what they suggest:
If Trump wins and Republicans hold the Senate or Biden wins, and Democrats get charge of the Senate, the disaster relief will be passed away and help the president and his people.
Studies show that this relief has done what the government expected; it kept the personal savings and disposable income at a higher degree than 2019’s pre-Covid times.
However, the third scenario is alarming.
Experts dread that there will be a hampering in additional disaster relief funds if Biden wins the presidency and Republicans hold Senate.
Such a situation can keep the yielding bond market and the mortgage market from rising.
Experts fear life without an approved and tested Covid-19 vaccine. They fear having higher mortgage interest rates. And to listen, from the Republicans, their famous “we are broke,” regarding the disaster relief in 2021.
Undoubtedly, the most critical factor is economic growth, as discussed earlier. Still, the generation of a proper vaccine is necessary for the world’s economy to prosper. All of us want to overdrive the Covid-19 virus, but we cannot do it without a vaccine.
Also, let us hope for having good leadership that provides relief. Only then, the economy can prosper along with the Mortgage market in 2021.