The spread between the two is now 1.53, indicating mortgage rates could rise. Actually, a bump-up in rate has already begun. As Joel Kan, Associate VP of Economic Forecasting for the Mortgage Bankers Association, reveals:
“Expectations of faster economic growth and inflation continue to push Treasury yields & mortgage rates higher. Since hitting a survey low in December, the 30-year fixed rate has slowly risen, & last week climbed to its highest level since Nov 2020.”
How high might they go in 2021?
No one knows for sure. Sam Khater, Chief Economist for Freddie Mac, recently suggested:
“While there are multiple temporary factors driving up rates, the underlying economic fundamentals point to rates remaining in the low 3% range for the year.”
What does this mean for you?
Whether you’re a first-time buyer or you’ve purchased a home before, even an increase of half a point in mortgage rate (2.81 to 3.31%) makes a big difference. On a $300,000 mortgage, that difference (including principal and interest) is $82 a month, $984 a year, or a total of $29,520 over the life of the home loan.
Based on the 50-year symbiotic relationship between treasury rates and mortgage rates, it appears mortgage rates could be headed up this year. It may make sense to buy now rather than wait.