2021 Mortgage Market Forecast with Josh Lewis, BuyWise Mortgage

2021 Mortgage Market Forecast with Josh Lewis, BuyWise Mortgage

Broker | Owner | Mortgage Consultant
Josh Lewis
Published on December 28, 2020
2021 Mortgage Forecast with Josh Lewis

2021 Mortgage Market Forecast with Josh Lewis, BuyWise Mortgage

Mortgage Market Update and Forecast into 2021

As the DOW just hit another record-breaking day, we asked Josh Lewis, BuyWise Mortgage where are we with interest rates as we head out of 2020 and what to expect as we transition into 2021.

Josh said that the interest rates are at their best levels of the year, and the interesting part is he noted, post-COVID, is the ten-year treasury rates went to really historically low levels and that’s not mortgage rates, but they usually follow in lockstep.

Josh said, "But at that time we saw this big spread open. So what we’ve seen over the last two or three months, the 10-year is getting higher as people get more confident that the economy is recovering, but despite that, mortgage rates keep coming down, because lenders are getting more comfortable with where the economy is and what the market looks like going forward.

So we’re getting back, we’re seeing this convergence where they’re getting back to their normal margin. So, it’s been a little bit interesting that while market interest rates as a whole have gone higher, mortgage rates have gone lower. So we are absolutely right at our best levels of the year, best levels ever."

He explained that for conventional loans, for the best-qualified borrowers, no cost, for a refinance, the rates are at 2.75, at a reasonable loan to value. For FHA or VA, the rates are in the low twos/2.25. "We’ve closed our best borrowers in that range. So, interest rates are great!" Josh stated.

Why are you seeing lower interest rates advertised?

Josh answered this question in a Q&A YouTube video, with this: "What you see in terms of rates that shows up in your mailbox, on the flyers, that’s for the best-qualified borrower paying a shit-ton of money in closing costs. And the reason for that is if I want to spend $100,000 sending mailers out to people’s houses, my only purpose is to get the phone to ring.

So, for example, I have a client that we just locked into a mortgage with a 2.75 interest rate at no cost. The client said, “Well, I just got this thing in my mailbox, and it says they can do 2.125%.” My response? “No problem. You want 2.125, let’s do it.” We ran the numbers, and on his loan, he would have to pay $19,000 to get a 2.125 interest rate. It’s not a bait and switch, it’s just a loss leader. It’s, “Hey, how do I make my phone ring?”

"So in terms of when I give numbers, you ask, “What are the interest rates?” I’m always going to give you the rates for the best-qualified borrower because it’s a lower bound. We know that’s as good as it gets. And the reason why we don’t quote, well, what’s a middle of the road? Well, it varies, there are so many different factors. Interest rates vary by loan to value, how much of a percentage of your home you owe. It varies by your credit score, it varies by loan program. So, there’s a lot of variables in there, so we always want to give you what’s your best case, and hopefully, you’re really close to that. But most people are right there or a little bit off of it.

If you have a really low credit score or a really high loan to value, it can be significantly different, but those are where the best case interest rates are today."

Will interest rates change much as we head into 2020?

When asked about this, Josh said, "I don’t think we’re going to see the interest rates move much at all. There’s not a reason for them to shoot up. What would we need for interest rates to go higher? We would need certainty in what’s going on with COVID, and that would give markets confidence that we’ve reached an absolute bottom and that things will improve rapidly in the economy. So we’ve seen the vaccine, and that’s been positive news and stocks have traded well off of that, but we don’t know how quickly it can get rolled out, we don’t know how it’s going to work out, we don’t know if it does work out, or when it does work out, or when we get enough people vaccinated, how quickly the economy recovers.

So the first quarter of next year, rates are going to remain really low. The thing to remember is that last year, what we were looking at is lenders had more loans than they knew what to do with, so rates were artificially high based on the fact that they just didn’t have any capacity. There was no need for them to lower rates because they were operating at full capacity. Even as rates inch up, once lenders don’t have their coffers full of loans, they will get more competitive. What we’ve been seeing is lenders getting more competitive because they have the capacity and they want to keep their people working. They hired a ton of staff this year, and before they let people go, they’d rather lower their margins on those loans and see if they can keep everyone busy and working through the holidays.

How will rates be affected with so much uncertainty in the market?

We have a lot of uncertainty in the US right now. What are we looking at for the next few months? "That runoff in Georgia is not going to be finished till January. No matter how that goes, we’re still going to have two, three months of uncertainty. Uncertainty keeps interest rates low. And even when we get a little bit more certainty, it’s going to be slow and it’s going to be slow to increase. Rates are going to be, worst case, in the low threes for the next year. That's my prediction.

If you are looking to refinance your mortgage or are looking to discuss a purchase loan, please contact us at Buywise Mortgage and we can work with you on getting the best loan for you.

Broker | Owner | Mortgage Consultant
Josh Lewis Broker | Owner | Mortgage Consultant
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(714) 916-5727

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