Mortgage rates may drop even lower due to Delta variant, expert says

Mortgage rates held near all-time lows in July 2021 for home purchase and refinancing loans, according to data collected by Credible. With such low rates for the month, homeowners and prospective buyers may be wondering if these record-low rates will continue into August.

While experts have different forecasts on how mortgage rates will change for the rest of the year, Credible's initial mortgage rate data from the beginning of August may suggest that rates will remain low — or at least hold near record lows for the time being. Still, it's imperative that home buyers and owners act fast to lock in a mortgage rate in case rates do tick up in the coming months.

You can lock in a historically low mortgage rate for home purchase and refinance loans on Credible's online marketplace without impacting your credit score. 

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How will mortgage rates change in August?

The COVID-19 delta variant may send interest rates even lower in August, according to Mike Fratantoni, chief economist and senior vice president of the Mortgage Bankers Association (MBA). The delta variant is already impacting the job market, according to the latest ADP employment report, which is a cause of concern for investors worried about more stagnation in the economy, Fratantoni said.

"Interest rates drifted lower globally last week, as markets assessed the latest concerns regarding the delta variant."

- Mike Fratantoni, chief economist and senior vice president of the Mortgage Bankers Association

Fratantoni added that the markets tend to overreact to coronavirus-related news, citing when mortgage rates spiked earlier in 2021 after the vaccine sparked a sense of optimism among investors. Mortgage rates eventually settled back down, and Fratantoni predicts a similar course with the delta variant news: interest rates will sink lower as an overreaction, but they'll likely rise again in the not-too-distant future. 

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Credible data showed that mortgage interest rates fell during the first few days of August. Refinance rates fell to 2.00% for both 10-year and 15-year mortgage products on Aug. 2, 2021, according to data from Credible. Rates on a 30-year mortgage remained unchanged at 2.75%, giving borrowers the opportunity to snag a sub-3% mortgage rate. 

Historically low interest rates won't last forever, though. The MBA predicts that 30-year mortgage rates will rise slightly by the end of 2021 due to positive economic growth. Plus, the Federal Reserve predicts two rate hikes by 2023, which will inevitably cause interest rates to rise by then.

"With a forecasted rate of 3.4% by the end of the year, you can read between the lines that we expect them to rise around 20 basis points between now and then," said Adam DeSanctis, MBA director of public affairs.

"Our sense is that there are a lot of factors lined up that are going to be pushing rates up over the next 6, 12, 18 months," Fratantoni added.

Since mortgage rates are still hovering below 3% across all loan lengths, now is the time to refinance or purchase a home — just in case Fed interest rates do tick up sooner than predicted. 

There's never been a better time to take out a mortgage loan and lock in a sub-3% rate. If you're considering purchasing a home or refinancing your current mortgage, visit Credible to compare rates across multiple lenders. Doing so ensures that you're getting the lowest possible mortgage rate for your financial situation.

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Now is still a good time to lock in a record-low mortgage refinance rate

Mortgage refinance rates may continue to drop with the elimination of a pandemic-era mortgage refinance fee on August 1. The Federal Housing Finance Agency (FHFA) ended the 0.5% Adverse Mortgage Refinance Fee earlier than expected as a way to reduce housing costs for those who have not yet refinanced to a historically low interest rate. 

About three-quarters of homeowners have not yet refinanced their mortgages, according to a recent report by the home shopping platform Zillow. This means that millions of American homeowners may be missing out on the opportunity to lock in a much lower mortgage rate than what they currently have.

Mortgage refinancing can lower your monthly payment, help you pay off your mortgage faster and save you thousands of dollars in interest over the life of your home loan. You can use a mortgage payment calculator to estimate how much mortgage refinancing can save you.

It's important to compare refinance rates across multiple mortgage lenders to ensure you're locking in the lowest rate you can possibly get. You can shop around for mortgage refinancing loans on Credible without a hard credit check, which means you have nothing to lose by comparing offers.

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