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Mortgage Rates Will Rise in 2021, According to 5 Experts. Here's What That Means for You

December 14th, 2020 3:27 PM by Jackie A. Graves

It’s been a wild year for the mortgage industry, with rates hitting record lows numerous times. 

But if you haven’t already refinanced your mortgage or bought a home, past interest rates aren’t as important as what they’re going to be in the future. While no one has a crystal ball when it comes to predicting mortgage rate trends, the general consensus of the experts we talked to is that it’s likely rates will inch upward in 2021.


If you’re considering a mortgage refinance you may not want to wait long, as many of the experts we talked to expect rates to rise in the second half of 2021.


Where Are Mortgage Rates Headed in 2021?

Exactly when we may see rates start to rise, and how much they will increase, depends on a few factors. How we’re able to deal with the pandemic and its impact on the economy is the main thing to pay attention to. But other factors, like inflation and the Federal Reserve’s desire to keep rates low, will also affect mortgage rates.

What may seem like a small increase in rates can have a big impact on your bottom line. For a $300,000 30-year home loan, an increase of 1%, from 2.7% to 3.7%, would increase your monthly payment by $164. Over the life of the same loan, that extra 1% would cost you an additional $59,159 in interest, according to the NextAdvisor mortgage calculator.

If you’re in the market for a new house or are looking to refinance your current mortgage, just keep in mind: The interest rate isn’t the only thing to pay attention to when shopping for a mortgage lender. You should carefully read each loan estimate to see exactly what fees you’re paying, because the lowest interest rate isn’t always the best deal.

As of Dec. 10, 2020, the average 30-year fixed mortgage rate is 2.71%, according to Freddie Mac. Looking ahead, here’s what the experts are predicting will happen to mortgage rates in 2021.


Logan Mohtashami, Housing Data Analyst at HousingWire

Based on how low interest rates were in 2020, Mohtashami believes we’ll see the average mortgage interest rate inch upward in 2021. But it is difficult to see it going above 4% since we’re still in the thick of the COVID-19 pandemic, he says. “The COVID-19 crisis was a deflationary event that sent bond yields and mortgage rates lower than they traditionally would have gone in a normal recession.” 

Any increase we may see in mortgage rates hinges on the health of the U.S. economy, and Mohtashami maintains that is dependent on how we handle the pandemic. “If we don’t execute on getting a vaccine, then mortgage rates could stay around these low levels,” he says. “Once we get a vaccine distributed and better treatments, that last 10 million Americans who are still unemployed should be able to find work. That income, plus the fiscal aid and monetary aid should drive up inflation just a little bit higher, and demand should be higher and growth should be back to normal … Slow and steady growth of the U.S. economy will be the primary driver of higher mortgage rates next year.”


Lawrence Yun, Chief Economist with the National Association of Realtors

Yun believes that mortgage rates will remain stable in 2021 — with the potential for a slight increase from the all-time low of 2.71% we saw in 2020 for 30-year, fixed rate mortgages. “In 2021, I think rates will be similar or modestly higher, maybe 3%” he says. “So mortgage rates will continue to be historically favorable.”

Yun thinks the Federal Reserve’s actions are critical to the direction mortgages rates will go. “The Federal Reserve has indicated they want to pursue this low interest rate policy for a long period, over the next two or three years, “ he says. While the Federal Reserve doesn’t directly control mortgage rates, Yun agrees with the conventional wisdom that its actions will indirectly impact rates — and can help keep them low in 2021.


Danielle Hale, Chief Economist at

Hale sees low rates continuing through the first half of 2021. “Making any kind of prediction for next year is difficult. But our expectation is that mortgage rates start the year roughly in line with where they are now, and they stay fairly low — right around 3% — for the first half of the year,” Hale says. She believes that in the second half of 2021, if access to a vaccine helps to improve the economy, rates could rise. “Mortgage rates could approach 3.4% by the end of the year,” she says.

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