We’ve had a fortunate run with historically low mortgage rates, especially over the last year. The onset of the pandemic set an additional downward trend in rates, pushing them to all-time lows. However, we are not going to be in a pandemic forever, and rates are eventually going to rise. Currently, mortgage rates have crept slightly higher but remain near historic lows. Now is a perfect time to take advantage of these rates before they move even higher.
Below are two key areas to watch as we move beyond the pandemic and begin to see the economy slowly recover.
The Fed: The Fed has been buying bonds to keep rates low and may need to do more to keep them that way. Why? The well-publicized stimulus plans and increased government spending has created record amounts of new bond issuance to pay for the plans, and it is weighing down on bond prices and pushing rates higher. The opposite is true. When bond prices are rising, interest rates fall.
Inflation: Another by-product of all this record stimulus is rising inflation. Currently, consumer inflation expectations are at the highest levels in over two years. Looking toward March 2021, year-over-year headline inflation will be even higher than it is today. What happens when inflation rises? The cost of goods and services rise, and the value of the dollar becomes weaker. Real assets, like real estate, also move higher in price when inflation ticks up, and that is good news for homeowners.
Bottom Line: We could see mortgage rates tick up a bit but remain at record lows until the economy stabilizes as we continue to move beyond the pandemic. Although the Fed does not affect mortgage rates directly, it will still be able to stifle increasing rates by continuing to buy bonds. Not to worry, as there is still time to take advantage of historically low rates.
Source: Mortgage Market Guide
We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.
