Will mortgage rates go up or down in August?

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If you’re thinking about getting a mortgage, you might be worried that mortgage interest rates will climb in August after falling sharply since the start of the pandemic. The good news is that experts expect rates to stay at or near historic lows in August 2020.


© Photo par Wolfgang Kaehler / LightRocket via Getty Images
Mortgage rates in August

“Mortgage rates are expected to remain at record levels through August and for the foreseeable future, given the weak economic environment. The uncertain nature of the coronavirus and the likelihood of a long economic recovery will limit mortgage rates, ”says Greg. McBride, CFA, Chief Financial Analyst Bankrate.

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Mortgage rates have continued their downward trend since the COVID-19 crisis began months ago. The average yield on the benchmark 30-year fixed-rate mortgage fell in the last week of July to a new record low of 3.30%, according to Bankrate’s weekly survey of major lenders. A year ago, the 30-year rate was 3.97%. The 30-year fixed rate average for the week is 0.67 percentage points below the 52-week high of 3.97%.

Where mortgage rates are heading in August

Rates aren’t expected to rise or fall much in the near future, the pros agree.

“While we can expect a slight daily variation, the 30-year fixed mortgage rate is unlikely to change much in August. Continued demand for 10-year Treasuries – the anchor for long-term mortgage rates – will be used to hold rates. hovers around plus or minus 3 percent, ”says Ken H. Johnson, real estate economist at Florida Atlantic University in Boca Raton, Florida.

Logan Mohtashami, senior analyst for HousingWire, located in Orange County, Calif., Echoed those thoughts.

“The 10-year yield refuses to cross the 0.62% mark with any speed,” says Mohtashami. “But we have two factors that could lower rates a bit: if government disaster relief is not big enough, and if some of the recent economic gains are lost. Additionally, if this second wave of coronavirus cases worsens, it will cause yield to drop to 10 years. ”

Indeed, the longer our country goes without an effective COVID-19 vaccine, the more uncertain our economy becomes and the more likely it is that rates will remain stable or fall even more.

“How we manage the pandemic will be a major factor in the evolution of long-term mortgage rates,” Johnson says. “With a combination of vaccines and effective treatments, the impact of the virus on the economy will be less and, other things being equal, rates are expected to remain stable. ”

The next election could also change things sooner than expected.

“I expect the 30-year rate to drop below 3% in August as the election cycle will have enough nervous traders that you will see extra money flowing into bond holdings, which will push down rates, ”says Derek Egeberg, branch manager for Academy Mortgage Corporation in Yuma, Arizona. “I expect rates will stay lower until the end of the fourth quarter and until this year’s holiday season results are released and the election cycle is over. “

Mortgage rates beyond the month of August

The Mortgage Bankers Association predicts that the 30-year fixed rate is expected to remain relatively unchanged over the next five months, averaging 3.3% in 2020 and reaching 3.5% in 2021. Freddie Mac’s expects rates to stay low, falling to an annual average of 3.4% this year and 3.2% in 2021. Fannie Mae, meanwhile, predicts rates will drop to 3.0% in the third and fourth quarters of 2020 and will fall to 2.8% per year from now on.

In his forecast for the remainder of the year through 2021, McBride estimates that the trajectory of mortgage rates will be dictated by the evolution of the economy, the ongoing stimulus measures from the Federal Reserve and the inflation outlook.

Act quickly on a new mortgage or refinancing, advises an expert

Egeberg believes that now is the best time to buy or refinance a home.

“As if asking our grandparents why they didn’t buy more houses 50 years ago when the prices were cheaper, our children will ask us about the ‘big drop in interest rates’ of 2020 and whether we were able to take advantage of these historically low rates, ”he says. “This is the biggest buying opportunity of our lives due to the affordability of debt repayments in today’s interest rate environment. ”

Before rushing into a decision, do your homework first; calculate the numbers and make sure you can afford the monthly payments.

“Rather than planning to buy a home with low mortgage rates, it’s better to make sure your finances are strong before you take the plunge,” says McBride. “Work on improving your credit score, paying off debt and increasing your savings. These steps will help you better prepare for a successful homeownership, whether your rate is 2.5% or 3.5%.

Photo par Wolfgang Kaehler / LightRocket via Getty Images.

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