The global pandemic has changed the world we see. It has changed the business scenario, especially the mortgage industry. It broke records in the pandemic year. In the same year, there were actions by Federal Reserve which brought interest rates to record-low levels. It was a year where people worked from home, which is continued. As a result, people spent more time at home upgrading their space. This is also increased the mortgage demand. This shift in consumer behavior has made people wondering what’s there in the store in 2021 for the mortgage industry.
- Mortgage Rates will rise in 2021
In March 2020, amid nationwide lockdown, the Federal Reserve dropped the Federal Funds rate to the lowest. With the intervention of the Fed, mortgage rates hit the lowest in 50 years, according to Freddie Mac. According to Freddie Mac, the 30-year fixed mortgage will see a slight rise, and rates are expected to be around 2.9% in 2021
- Migration to Suburbs
Although there has been some speculation that there will be an exodus into suburbs, the expert doesn’t foresee it. Lenders don’t believe in the mass exodus, it does foresee a continued migration out of expensive metropolitan areas into less expensive metro areas.
- Fewer Refinance and more purchase
If rates continue to trend upward, the refinancing boom that took place in 2020 will slow down by 2021. One of the reasons is the rise in the mortgage rate, they will remain low to make home-buying attractive.
- Fall of Originations compared to 2020
In 2021, there will be a rise in home sales compared to 2020, but total originations of loans will decline. According to Fannie Mae, the originations will be around $3.9 trillion. Besides, it expects the purchase of mortgage originations to be around $1.8 trillion.
- Drop in the commissions’ revenue
With the decline in originations, there is a possibility of a decline in the commission. One of the reasons behind the reduction in commission is due to a large part of the decline in refinancing. Many top mortgage finance lenders are expecting to see a slowdown in revenue in 2021.
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