Mortgage interest rates could slowly and steadily increase over the course of October, one expert explained. Economists forecast interest rates could end this year hovering above the 3% mark. (iStock)
Mortgage rates jumped significantly over the last week, rising above 3%, the highest level since June and the largest jump from the previous week since February. Now, one expert says he expects these mortgage rate trends to continue for the remainder of October.
"We expect longer rates to rise, but only modestly," says Mike Schenk, Credit Union National Association (CUNA) chief economist. "At the end of the fourth quarter we expect the 10-year to be right around 1.5%, so that would put the 30-year mortgage rate at about a little bit north of three."
Other economists have taken a more conservative view on interest rates. Fannie Mae projected the 10-year Treasury would remain at about 1.3% in its latest housing forecast, putting mortgage rates at about 2.9% to finish 2021. If you want to refinance your mortgage before current mortgage rates rise, visit Credible to find your personalized rate from multiple lenders and see how much you could save on your monthly mortgage payment.
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Rate increases will be small as inflation subsides
Although rates are rising for loans on single-family homes, Schenk predicts that the rate of increase will be slow and steady.
"In general, we don't expect to see big changes in rates going forward," he said. "And part of the reason for that is that most of the data that we're seeing on the inflation front suggests that inflation is coming down."
The average 30-year interest rate currently sits at 3.01%, and the 15-year annual percentage rate (APR) is currently 2.28%, according to Freddie Mac data. This comes after the Federal Reserve revealed it could begin raising rates as soon as 2022.
Visit Credible to take out a mortgage refinance. You can get prequalified for your loan amount for multiple mortgage lenders in minutes without affecting your credit score.
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Home values to increase in month ahead
The latest Case-Shiller data showed home prices surged at nearly 20% annually in July. Home prices have increased through the summer, and could continue to surge in the coming month due to labor and materials shortages. Schenk said home prices are likely to rise as coronavirus vaccinations spread and death rates from virus slow, improving the employment picture.
"It’ll increase confidence and, I think, increase the demand for housing," Schenk said. "On the other side of the equation, more than likely, in the month of October and in the near future beyond October, continue to wrestle with supply-side issues. And so if you put those two things together, higher demand and then soft supply, that would suggest to me that price increases would be more likely than decline."
Schenk explained that currently, home prices are "unusually high," but that it is unlikely we will see a "bubble burst" similar to the Great Recession of 2007. Homeowners can take advantage of their new home equity while lowering their mortgage interest rate through a cash-out refinance. Borrowers should contact Credible to speak to a home loan expert to get all of their questions answered.
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