Image: Reference

 This year may start with the lowest mortgage interest rate in history, but the record will not last. Rates are now starting to climb and are expected to continue to hit higher levels by 2021.

Last week, mortgage rates reached their highest level since August 2020. According to Freddie, the average interest rate on a 30-year fixed-rate mortgage went up to 2.97%. The 15-year fixed-rate mortgage has risen to 2.34%. It marks the biggest move in a month since last March when the epidemic began to spread.

Daniel Hale, the chief economist at, said that while home buyers and seekers of renaissance may have lost the lowest rates ever, the average rate is still historically low. Keep in mind that a year ago, the rate for a 30-year fixed mortgage was 3.45%.

“It’s not a steady march upwards, but it looks like we’ll be able to go through a new striking trend on a regular basis,” he said.

Most experts agree that rates will continue to rise as the economy improves. But how will they go high?

Why rates are rising?

The reason for the rise in rates is good news: the economic picture is bright.

"Mortgage rates fell in 2020 due to a weaker economic outlook," said Greg McBride, a chief financial analyst at "Now that the economic sky is looking brighter, mortgage rates are reversing last year's decline when they went to an all-time low."

While unemployment remains high compared to the previous epidemic, bond yields are seen as a benchmark for interest rate activity, with the economy expected to heat up later this year. A 30-year fixed mortgage rate usually revolves around a 10-year Treasury rate.

McBride thinks inflation concerns will push up bond yields and mortgage rates further. "We'll get a breath in March, but there'll be a little more pain in the meantime."

Joel Kane, associate vice president of economic and industry forecasting at the Mortgage Bankers Association, said it was expected that more people would start spending more as wasteful parts of the economy became available again, cases of coronavirus would decrease, and people would be vaccinated. Said Joel Kane, associate vice president of industry forecasting.

“The vaccine seems to be picking up the rollout,” he said. "If it continues at a reasonable pace and reaches a large part of the population by the middle of the year, it will help the overall economic picture."

Another potential contributor to the rising rates is the 9 1.9 billion stimulus plan suggested by the Biden administration, which is currently being pushed by Congress.

“We don’t know how much of it will go through, but in some homes it is likely and it will help the economic picture,” Kane said. "Again, that would put upward pressure on the rate."

But rates are not expected to rise. The MBA predicts that by the end of this year, the 30-year fixed-rate mortgage rate will reach 3.4%, down from 3.5% in the first quarter of 2020.

Have homebuyers lost their chance?

Despite the rate hikes, most forecasts show that they are unlikely to rise much.

Lawrence Yun, the chief economist at the National Association of Realtors, said an increase in mortgage rates is inevitable in the coming months. "But nothing to worry about. Maybe we'll reach an average of 3% for the year and that's still historically low."

The big problem for buyers is the rapid rise in home prices.

The housing market is on fire, with record-low inventory pushing home values. According to the National Association of Realtors, in January, existing home sales were up 24% year-on-year and the average home price was up 14% from a year earlier.

“Between rising rates and short supply in house prices, Neu will undoubtedly challenge many housewives,” Haley said. "However, historians will still consider taking historically low mortgage rates and rent increases in some of the most affordable markets for homeowners to seriously consider buying rather than renting to people on the fence."

Read more, Mortgage Loan: Breaking Down The Basics - Mortgage Industry

Haley said buyers currently in the market should be prepared for some rate moves in the week-to-week. If you're shopping right now, Haley said, look at your target home price and calculate what happens to your budget if the rate goes up.

Still, for most homebuyers, rising interest rates, rising prices, or finding a home in the next few months will not be as big of a challenge. Together these factors are likely to lead to anger in the housing market.

“Mort’s mortgage rate means the red hot housing market could just shift down towards sizzling,” McBride said. "The lack of homes available for sale is a much bigger obstacle to a quarter-percent increase from the bottom of the mortgage rate."

The big issue is finding a home that is affordable, said Robert Frick, corporate economist at the new Federal Credit Union. For example, he said, the difference between 2.300,000 mortgages is about 125% per month. "But if house prices rise 15% year-over-year, that would increase the monthly payment by more than $ 125."

The recent rise in mortgage rates could cool homebuyer interest, But they set strict deadlines for those considering refinancing. As a result of higher rates, refinancing activity fell 11% last week to its lowest level since December 2020, but according to the MBA, it has remained 50% higher than a year ago.

For those considering refinancing, the party is not over, McBride said, but it is approaching the last call.