Mortgage rates should stay near current level at start of 2021

Mortgage rates rose a basis point this week — ending the year near record lows — and are expected to remain flat heading into 2021, according to Freddie Mac.

“All eyes have been on mortgage rates this year, especially the 30-year fixed-rate, which has dropped more than one percentage point over the last 12 months, driving housing market activity in 2020,” Sam Khater, Freddie Mac’s chief economist, said in a press release.

“Heading into 2021 we expect rates to remain flat, potentially rising modestly off their record low, but solid purchase demand and tight inventory will continue to put pressure on housing markets as well as house price growth.”

The 30-year fixed-rate mortgage averaged 2.67% for the week ending Dec. 31, 2020, up slightly from last week when it averaged 2.66%. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.72%.

The 15-year fixed-rate mortgage averaged 2.17%, down from last week when it averaged 2.19%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.16%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.71% with an average 0.4 point, down from last week when it averaged 2.79%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.46%.

Zillow’s rate tracker, which measures offers made through its site, ended the seven-day period at its lowest level ever recorded. The post-Brexit trade deal between the European Union and the United Kingdom, along with the new fiscal stimulus package resulted in only modest movements in bond yields, Zillow economist Matthew Speakman said in his commentary issued on Wednesday night.

“The modest trend downward was a fitting conclusion to a year that has seen mortgage rates plunge to levels that seemed unfathomable a few years ago. But as a new year is set to begin, some notable upward risks to mortgage rates loom,” Speakman continued.

“Compared to the passage of the newly passed COVID-19 relief bill, which markets had been expecting for months, the results of two Senate runoff elections in Georgia, and the possibility of more fiscal relief are both far less certain in the eyes of investors and thus could prompt sharp movements in bond yields depending on their outcomes. Until more is known on either of those fronts, meaningful movements in mortgage rates appear unlikely.”