Mortgage giant Fannie Mae has some pretty strong predictions regarding the future of mortgage rates. In its most recent housing predictions, Fannie projects the average rate of interest for 2020 will get down to 3 percent… and then fall to 2.9 percent in 2021.
If that previously unbelievable prediction pans out, it means U.S. housing can look forward to a whole year of fresh, record low mortgage rates for home buyers and owners. And should the average make it to 2.9%, it also means that many borrowers with good credit could actually achieve rates in the mid or low 2% percent range. This could be fantastic news for individuals that haven’t been able get a mortgage right now due to the Coronavirus, you might still get a shot at an unbelievably-low rate during the next year or two. Rates that low can also make purchasing or refinancing obtainable for many who couldn’t make it work previously.
How are mortgage rates calculated?
When you take a mortgage, your lender is providing you lots of money to buy a house. Due to the financial risks they shoulder to give the loan, financial institutions charge interest which borrowers are going to need to pay on top of the amount loaned.
Interest is figured up as part of the loan sum, and if your mortgage is fixed-rate, your rate of interest will remain constant for the loan’s duration. However, if your mortgage happens to be the adjustable-rate variety, your rate of interest could go up or down, based on market indicators.
Mortgage payments are calculated so the lenders interest is paid off faster, and the majority of what’s paid during the early years of your loan goes to interest. Over time, as the mortgage amortizes, an increasing amount of your payment is applied to the principal, and not as much toward interest. The entire cost you pay for finance ing, factoring in rates, points, fees, and everything else is known as APR.