The Federal Reserve uses low rates as a weapon to combat the economic effects of the COVID-19 pandemic.

The end of 2020 won’t necessarily mean saying goodbye to the favorable 2% mortgage rates that hit historically low levels 16 times over the past 12 months. In fact, most industry observers believe rates will remain at the same low levels in 2021 as the Federal Reserve uses low rates as a weapon to combat the economic effects of the COVID-19 pandemic. This means 2021 will still be a good time to purchase or refinance a home, according to Len Kiefer, Freddie Mac‘s deputy chief economist. “There’s certainly a risk that rates could head higher, but our baseline forecast has them remaining near record lows,” Kiefer said. “In that scenario, the pressure on housing markets will continue and it’s likely that we will continue to see strong house price growth, though perhaps not as red-hot as what we’ve had in recent months.” Even with interest rates falling more than a full percentage point in 2020, Kiefer said he believes the housing market would have still enjoyed a strong second half of the year absent the record-low rates. But the statistics – record home sales and price growth – would not have been so “eye-poppingly strong,” he said, “We’ve seen the labor market make strong gains since spring, but the pace of recovery waned at the end of 2020. We all are looking forward to an end to COVID. It may take a while for the economy to fully recover from the pandemic and associated recession.

Source: HousingWire