With mortgage rates fluctuating over the past six months, dipping down to record lows, it makes sense why some buyers would be unsure of when to pull the trigger on a home. Some may be hoping rates drop even lower, but there are no clear answers on if that could even happen, says Realtor.com. Economists have not been able to forecast rates because of all the uncertainty this year. One economist says mortgage rates could go lower, but the likelihood is slim. Another dip in mortgage rates could help buyers offset the growing cost of homes. Another economist suggests that rates will play off the strength of the economy.
The problem is, 2020 hasn't been a typical year. There's never been a pandemic in our lifetimes, and this recession is driven by a virus, not a housing bubble or oil crisis or other economic trouble. And while mortgage rates are influenced by the direction of the Fed's short-term interest rates, it's not uncommon for them to, well, do their own thing.
"Technically speaking, mortgage rates could go lower. Theoretically, they could easily drop to around 2%," says Senior Economist George Ratiu of realtor.com®. "However, for lenders [who set their own rates], the likelihood of rates going much lower is pretty slim. They don't want to take the risk of a lower rate over the length of a loan."
That's what happened in March. Rates fell to around 3.3% in response to the coronavirus-induced upheaval in the financial markets, and homeowners rushed to refinance their existing mortgages. Lenders were so overwhelmed by the surge in business that they raised their rates to temporarily keep new refinances at bay as they scrambled to catch up.