Are Mortgage Rates Above 4% Truly a Thing of the Past?

If there’s one thing that’s been consistent in the housing business in this unprecedented year, it’s low mortgage rates. Before this year, the prevailing market interest rate had never been lower than 3.3%.

But not only did interest rates fall below that level for the first time ever, they’ve since fallen to new record lows more than a dozen other times over the course of the year.

That leads to the obvious question: just how long are these low rates going to last?

Economists from Fannie Mae and the Mortgage Bankers Association are already on record saying that they expect interest rates to remain low through at least the end of 2021, although they differ on just how interest rates will be.

Fannie Mae’s economists believe interest rates will remain below 3% for all of 2021, while the MBA’s economists expect interest rates to climb slightly throughout next year, reaching the previous record low of 3.3% by the end of 2021.

Now, new analysis from noted housing observer Frank Nothaft, the chief economist at CoreLogic, suggests that the housing industry should get very comfortable with interest rates below 3.3%.

According to Nothaft, “exceptionally low mortgage rates are likely to be around for an extended period.” In Nothaft’s view, the prevailing market rate for a 30-year, fixed-rate mortgage will remain below 3% in the early part of 2021.

That prediction is line with Fannie Mae and the MBA. But what’s different about Nothaft’s forecast is that it goes out three years. And over the next three years, Nothaft does not believe interest rates will climb back above 3.3%.

According to Nothaft, interest rates will average approximately 3.2% from 2021 through 2023, which would represent a nearly four-year run of interest rates remaining lower than they ever had been before this year.

And as Nothaft notes, rates at that level would be nearly a full percentage point below what the average interest rate was from 2010-2019.

So, in one economist’s view, interest rates will be well below 4% for at least the next three years. Unprecedented indeed.