Mortgage Rates Continue Upward Trend to 3.09% Says Michigan Lender

For the second consecutive week the average mortgage rate for a typical 30 year fixed loan has risen above 3% which is a trend not seen since last summer. At its current pace, the Mortgage Bankers Association is predicting that by the end of 2021 we could see rates reaching 3.5% which defies initial fears of a considerable economic downturn due to the Covid-19 pandemic.

Generally, while not great news for borrowers, a higher interest rate indicates a healthier economy. The MPC, in control of national rates, will lower the interest rates if the economy is under threat or shrinking. This lowering of rates is designed to stimulate borrowing and therefore jumpstart economic growth through increased spending. The fact that mortgage rates are showing a distinct rising trend reflects a healthy, competitive and growing housing market.

A rise in working from home, vacationing within the US, the vaccination roll out and increased optimism in the labor market all contribute to a healthy demand for housing. All this combined with a discrepancy between supply and demand for certain types of property equate to rising housing prices and mortgage rates.

Mike Fratantoni, MBA’s chief economist is optimistic that homebuyers will not be put off by the increased rate, stating “The combination of robust demand in the housing market, constrained but growing supply, and rapidly rising home prices will result in a strong spring market and a record level of purchase volume for the year. So long as rates stay in this 3% neighborhood and do not quickly climb above 4%, potential homebuyers will likely not be dissuaded by the modest increase.”

According to Fratantoni “An early warning sign (of the bubble bursting) would be a sustained drop in purchase application volumes.” While many market experts admit that a small drop in volume seems likely in the current climate, many lenders state they would be willing to take a hit on their own profit margins, in the interest of maintaining turnover in the market.

Doug Duncan, Fannie Mae’s chief economist confirms “There is some upward pressure on mortgage rates. Some lenders commented that for now, they are willing to absorb some of these costs to maintain volume. However, in the longer term, continued upward pressure on mortgage rates would likely dampen home sales as lenders raise mortgage rates.

For now, with only marginal increases in the rates from week to week, the market looks set to remain stable for the immediate future. The good news is that those with a property to sell can expect to find buyers with relative ease. For buyers, while it remains an extremely competitive market; with a good mortgage offer in place and firm negotiating skills, purchasing your dream home is still well within reach.

Looking for a Mortgage Lender in Michigan?

Julie Krumholz is has been helping Michigan homebuyers for over 30 years and has several loan programs available for various incomes and financial situations. If you are looking for a mortgage lender in Michigan, call Julie from Superior National Bank today at: 586-382-5482 and let her help you navigate through the loan process and answer any questions you may have.