Administration Change and Mortgage Rates

February 2021

For prospective homeowners and those looking to refinance, dependably low interest rates have been a silver lining of the struggling pandemic economy. With a Democratic White House and Democrat majority in Congress, the incoming administration will have an easier time pushing through fiscal stimulus plans to help the nation’s pandemic recovery efforts along. As the economy gets a boost, mortgage rates are bound to increase as well – and the writing is already on the wall, it would seem.

Following the election outcomes and inauguration, the 10-year Treasury yield climbed above 1% for the first time since the onset of the pandemic. Mortgage rates are likely to do some upward nudging of their own as the economy gains strength, boosted by vaccine efforts and the plethora of planned recovery options currently being debated. The Mortgage Bankers Association predicts 30-year fixed mortgage rates to hit 3.2% by the third quarter of 2021 and hold steady until 2022.

Here are the near-term impacts according to Forbes Advisor analysts:

  • Homebuyers who want to lock in rates will be selecting lenders and looking for preapprovals with hopes of locking in their rates while they shop. There will be a scramble in the first half of this year to be sure buyers take advantage of historic low rates. HousingWire says purchase mortgage originations are expected to rise to $1.8 trillion in 2021, up from 2020’s projected $1.6 trillion.
  • In the same vein, homeowners considering refinancing may feel a sense of urgency to complete the transaction in the first half of 2021, making the most of savings opportunities. Still, Fannie Mae’s Economic and Strategic Research Group projects 2021 total refinance originations to fall short of 2020’s all-time high of $2.8 trillion, netting out around $2.2 trillion.
  • Higher rates will help stabilize home prices. This means the hot market will cool a bit, giving first-time homebuyers “more breathing room” and gradually slowing the frenetic pace of markets nationwide. While Fannie Mae still expects home sales to rise by 3.8% in 2021, the monthly pace is expected to slow as the year progresses. Fannie Mae’s chief economist Doug Duncan says, “Our latest forecast projects that the continued waning of pent-up demand… coupled with a modest rise in interest rates, will likely slow the pace of housing.”

All things considered, it sounds like we can expect another strong push in purchase and refinancing originations to keep us hopping in 2021! Please let me know if and how I can help you and your customers during this busy season. Stay safe and don’t ever hesitate to drop me a line if you have questions or want to chat.



Omar Khamisa
Mission San Jose Mortgage
2111 W. March Lane, Suite B100
Stockton, CA 95207
Office: 209-651-2000
Mobile: 510-648-5535
Fax: 209-434-2311
NMLS: 369325


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