You have probably noticed that mortgage rates have been dropping in the last few months. Since the start of 2020, when rates were already near historic lows, they have continued to decline. In fact, this year alone the interest rates on mortgages have hit record lows 11 different times. If you are in the marketing for a mortgage loan or thinking about refinancing, you are probably wondering whether they will keep going down or if now is a good time.
There are a lot of market factors that go into the mortgage loan rates. Under normal circumstances, the Federal Reserve sets basic interest rates (the rate that mortgage loans are based on) as a way to control inflation and/or provide flexibility in the markets for companies and individuals to borrow cash. Whether rates go up or down often depends on whether the economy is in a positive or negative trend.
However, 2020 has proven to be anything but normal. Current low interest rates have been steadily declining as the economy took a big hit in the wake of COVID-19. Election years also usually contribute to some volatility in the interest rates—the market adjusts in October based on what they think might happen with the election, then if it doesn’t happen as planned (like in 2016 when Trump unexpectedly won) you can get a quick increase in mortgage rates as investors recalibrate expectations.
COVID-19 itself is also a wildcard in today’s interest rates. Homebuying has remained relatively high in spite of the overall bad economy, but that might slow down if the virus continues to depress business. A vaccine could also provide an economic boost, which could change interest rates as well if markets rally, driving them up from their current rock-bottom levels.
Unfortunately there is no way to actually predict what mortgage loan rates will do in the future, so if you are thinking about trying to “time the market” to get the lowest rate, it’s not something that you can do with any level of certainty. Anyone who tells you otherwise is probably not being honest with you. However, you can look at some of the broad economic trends to see what might happen with rates in the coming months.
If you’re on the fence about whether to get a mortgage loan right now, you probably should go ahead. Although interest rates could decline again, they are probably not going to hit much lower than the current levels, and they could go up in the coming months. If they do end up going down by a lot, you can always refinance to a lower rate but if they go up you will be stuck paying whatever the current rates are at the time.