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With spring on the horizon and vaccines becoming more widely available, a return to normalcy could  be coming into view. With that, the historically low mortgage rates of 2020 may begin to rise.

Just two weeks into the new year, Freddie Mac reported that “mortgage rates climbed 14 basis points to 2.79%.”

As mortgage rates continue to rise, the overall cost of purchasing a home will be impacted. Higher mortgage rates equate to higher monthly mortgage payments, especially as home prices rise as a result of limited inventory. 

While economists are predicting that the transition will come slowly, borrowers would be smart to take advantage of the current low rates while they’re here, instead of banking on another drop that may never come. 

Where mortgage rates are trending for the start of 2021

There are still many unanswered questions related to the pandemic, possible stimulus checks and resulting market fluctuations. However, Len Keifer, a deputy chief economist for Freddie Mac, stated that,  “Our baseline forecast has rates right around where they are now throughout January 2021. And we forecast interest rates to remain flat over the next year overall.”

And while Freddie Mac’s predictions call for rates averaging around 3.0% in 2021, Keifer also stated that, “We should be mindful that they could easily ratchet higher in a hurry. We only have to look back to 2018 to see a housing market slowed by modestly higher rates.” 

Keep in mind that inventory of available homes is also at a historic low. As more buyers prepare to hit the market for a typically busy spring, it will be more challenging than normal to find a home in many areas. Lock in your budget before looking for homes and prepare for potential bidding wars that will make low mortgage rates even more important in the long run. 

Recommendations for those undecided

If you’ve found a home that satisfies your needs and your budget, it’s better to act now rather than depend on future declines that may never come. Keep in mind that the future will likely hold a very tight inventory as well. 

For current homeowners debating on a refinance, the choice is even clearer. By delaying your refinance, you may miss out on meaningful monthly savings. Additionally, you may be able to roll most or all of your closing costs into the loan, limiting any cash outlay. 

By taking action now, you’ll be able to lock-in current mortgage rates that could make the investment on your home worth significantly more down the road as you save interest over time.