With the turbulent 2020 coming to a close, we’re all wondering what will be in store for the mortgage market in 2021. Will things stay the same, will circumstances get worse, or will they improve? Some experts have shared their opinion.
What’s in Store for Mortgage Rates?
One of the hottest topics in real estate in 2020 has been the all-time low mortgage rates, but will they continue to stay low? Experts have conflicting opinions on this one. Fannie Mae forecasts rates staying below 3 percent in their latest chart depicting a slow rise that will keep rates hovering around 2.9% throughout 2021 for 30-year fixed rate mortgages. The Mortgage Bankers Association, however, predicts a rise to 3% for FRM before the year is out, with an increase to 3.30% to follow.
With rates rising, staffing could become an issue for lenders. The decline in mortgage rates resulted in a spike in refinances and new purchase loans, meaning lenders need to recruit to keep up with demand. A decline in rates would also cause a decline in refis and purchase loans, meaning the lenders that grew their staff in 2020 to keep pace, would likely need to look at reducing staff. This decline in new loans could also pose obstacles for small lenders that haven’t properly prepared for further shutdowns that may still happen, or for remaining competitive after the market starts to cool.
Continued low rates may sound great if you’re in the market to buy a house, but they could add complications. With the low interest rates have come an increase in prepayments, discussed in an article by National Mortgage News, which could be a cause for concern for mortgage servicers. Prepayments are decreasing their value and those mortgage services are facing other risks from the unknown number of loans that are headed toward foreclosure. The moratorium has run out, forbearances are ending, and it’s very likely we’re going to see a spike in foreclosure activity in 2021.
Is There Anything To Look Forward To?
National Mortgage News cites a quote from Aaron King, CEO of Snapdocs, that states, “I expect at least 30 percent of all U.S. closings in 2021 to be hybrid in nature, drive massive efficiency across the board and creating a much-improved borrower experience”. So, all these adjustments to our “new normal” could be leading to permanent improvements for the closing process.
While price increases and strong demand from buyers are likely to remain, it’s questionable whether or not these are considered positive forecasts, it would really depend on who you ask. Low rates have their pros and cons, but they do at least bode well for homeowners looking to refinance their homes and lenders looking to expand their business in the New Year.
For better or for worse one thing is for certain, it will be an educational experience to see how the market reacts in 2021.
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