Higher mortgage rates symbolize an economy rejuvenated
In 2020, housing was an economic bright spot for a nation shuttered inside. Globally speaking, things look much different roughly a year later – jobs are returning by the millions, a series of viable vaccines are being deployed across America, stimulus checks have hit bank accounts and mortgage rates are ascending rapidly from nearly a year of historic lows.
In December, when rates were still at record lows and the vaccines had not been widely distributed, the Mortgage Bankers Association projected 30-yr mortgage rates at 3.2% in 2021, 3.6% in 2022 and 4.1% in 2023. Those forecasts have changed dramatically – as of March 19, the MBA revised those numbers to an average of 3.6% in 2021, 4.5% in 2022 and 5% in 2023. The last time rates reached heights of nearly 5% was in November of 2013, and before that, nearly a decade ago in 2011, according to Freddie Mac’s PMMS.
Joel Kan, the MBA’s associate vice president of economic and industry forecasting, pointed to various relief packages that gave households aggregate spending power and market sectors opening back up. Leisure, hospitality and travel in particular showed big gains.
Essentially, homeowners had money burning a hole in their pocket and now that they can spend it on industries that were previously hindered, the amount of money that is getting pumped back in to the economy could eventually push mortgage rates far above pre-pandemic levels.
“The expectation, and the realization, of stronger growth and a stronger job market puts upwards pressure on rates, fundamentally, through the rest of year,” Kan said. “The spending and stimulus bills needed to be funded somehow, and that is going to come from Treasury auctions which is going to push rates upwards.”
That said, Kan does expect some near-term volatility in the market regardless – rates may fall and then climb back up at the drop of a hat. But generally speaking, the MBA isn’t changing its forecast on rising mortgage rates for the coming years.
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