Low Rates, a Refi Monsoon, and 2021 Predictions

Ali Reda sums up 2020’s mortgage market and offers a 2021 forecast.

 

In the lending world, 2020 proved to be a particularly interesting year chock-full of highs and lows. Without question, it was defined by incredibly low interest rates that triggered a flood of refinances. Homeowners in droves rushed to refinance so they could guarantee themselves a less burdensome monthly mortgage payment, and all that demand put a lot of stress on the banks. Since banks make their money in the long term, a surge of people refinancing out of their existing mortgages hurts them on the backend. 

To make up a bit for those losses, banks have already started moving up their interest rates here in the new year. Here’s what that means for you: If you’re trying to secure financing for an upcoming home purchase, going directly to the bank is not your best option because their rates will, on average, be among the highest ones out there. 

What will 2021 be like for mortgage lending on the whole? Is it still a good time to sell and buy? With home prices continuing to increase at a steady clip, the No. 1 thing preventing homeowners from selling is the fear that they’ll be stuck paying a higher price on their next home. Thankfully, we have a beautiful, never-before-seen equilibrium in the market; you can sell your current house for top dollar, then turn around and leverage historically low interest rates to lock in affordable payments on your new home. 

Here’s an example of this equilibrium in action: Let’s say you were to buy a house today for $453,000 at today’s rates. Your monthly payment on that house would be equivalent to the payment you’d have if you had bought a $400,000 home at an interest rate that was just one percent higher. The moral of the story: Your purchasing power is better than it’s ever been. 

From a financial perspective, now is a fantastic and rare opportunity to sell near the height of the market and still snag more home for your money on the buying side. If you’re thinking about buying or selling this year or just want to know what your home is worth in today’s market, check out some of the great links on our website. As always, give us a call or send an email if you have further questions on this or any other real estate topic. We’d love to hear from you soon!

Ali Reda - Envoy Mortgage

Sales Manager, NMLS # 354663

P: 612-404-1486 C: 612-940-6722

https://www.envoymortgage.com/loan-officer/Ali-Reda-Edina-MN

areda@envoymortgage.com

6800 France Avenue South, Suite 530

Edina, MN 55435