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It’s no secret that the historically low interest rates of 2020 helped fuel the mortgage market and housing industry in an otherwise turbulent year. With over $4 trillion in originations, loan officers had more business than they could handle. According to LBA Ware, the average loan officer handled $2.6 million in volume in the fourth quarter alone. Although purchase volume grew 71% annually, refinances skyrocketed with a 158% year-over-year increase, accounting for 51% of the total volume.

What does 2021 have in store for mortgage rates? According to Kelly Ann Zuccarelli, SVP, national builder and condominium program manager at Wells Fargo Home Mortgage, the projections are promising.

“The low-interest rate environment and robust refinance market is expected to continue in 2021, providing an opportunity for more homeowners to reduce interest costs or lower monthly payments on their current mortgages,” she says. “The first week of February, the weekly average mortgage rate for a 30-year fixed was at 2.73%, and rates have been trending below 3% since August. While rates are based on a number of factors that can sometimes be hard to predict, Freddie Mac is forecasting a low-rate environment for 2021 and even 2022 as the economy recovers.”

Dave Macke, regional vice president, builder division at New American Funding, agrees. “All the major housing industry forecasts suggest that 2021 will be another great year for the housing business. The forecasts all project that refinances are going to come down somewhat from last year’s record-breaking level, but still be above where they were in 2019, thanks to continued low mortgage rates. The experts expect purchase originations to rise this year as more new homes come onto the market and as the shift in what consumers want from their home continues throughout the year.”

Although the overall housing outlook remains positive, Zuccarelli warns it’s important to be aware of potential pitfalls as both consumers and home builders navigate these uncharted waters.

“While the NAHB/Wells Fargo Housing Market Index shows builder confidence remains strong, builders are worried about uncertainty in the economy, the rate environment, and constraints facing the industry, including rising home prices and construction delays,” she says. “From a financing perspective, [builders are] looking to us for our extended mortgage rate lock program. They’re also looking to us to keep them educated on credit policy changes that could impact potential buyers. We’re focused on providing buyers of new construction the financing options they need.”

In the coming months, lenders and home builders alike will need to be nimble and ready to quickly pivot, should the market environment shift.

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