Will mortgage rates go down in April 2021? Forecast and trends

Tim Lucas
The Mortgage Reports editor

Mortgage rates forecast for April 2021

April could turn out to be a game-changer for mortgage rates.

Already, rates have left the 2% realm and are creeping up into the 3s.

With more and more Americans getting vaccinated, and spring weather enticing us outside, the economy is just beginning to heat up. The faster it accelerates, the faster mortgage rates will rise.

Want to lock in near this year’s record lows? Now may be your last chance.

Find and lock a low rate today (Apr 9th, 2021)

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Mortgage rates next 90 days

This chart shows past mortgage rate trends, plus predictions for the next 90 days based on current events and 2021 forecasts from major housing authorities.

Mortgage rate forecast chart showing predicted 30-year mortgage interest rates in 2021.
Lock in today's rates before they rise (Apr 9th, 2021)

Predictions for April 2021

Want to stay ahead of mortgage rate trends in April? Here’s what you should be keeping an eye on in the coming month.

Reports of a stronger economy could drive rates skyward

April could be a defining moment for 2021 mortgage rates.

With key economic reports coming out throughout the month, investors will be taking a pulse on how well the economy is recovering.

February’s growth may have been a bit softer than expected. But when March data is released, we could see jobs and spending accelerating at much faster levels.

And that could spur some of the biggest rate spikes we’ve seen yet this year.

Borrowers who want to know what will happen to mortgage rates should pay attention to a few key reports:

  • Unemployment rate (released April 2) — Unemployment dropped further than expected in February. The unemployment rate for March is forecasted at 6.0% — but a lower number could mean people are going back to work faster than expected (bad for mortgage rates)
  • FOMC minutes (released April 7) — Investors will be combing this report from the Federal Reserve’s March meeting for any sign that the Fed is taking inflation more seriously than it’s let on in press conferences (potentially bad for mortgage rates)
  • Inflation rate (released April 13) — Core inflation rose slightly less than expected in February. But economists are expecting higher inflation numbers for March and the coming months (bad for mortgage rates)
  • Retail sales (released April 15) — Since 70% of the economy is driven by consumer spending, a very hot retail reading could indicate a hotter economy and more inflation (bad for mortgage rates)
  • FOMC meeting and rate announcement (April 28) — The fed funds rate isn’t expected to change. But again, investors will pay close attention to the Fed’s announcement for any sign of inflation worries (potentially bad for mortgage rates)
  • GDP growth (released April 29) — This quarterly report will sum up how well the economy is faring in its COVID recovery. The faster it expands, the higher mortgage rates will go

It’s a bit of a catch-22 that a stronger economy leads to higher mortgage rates.

But it’s not all bad news. ‘Higher’ rates have to be taken in context.

Even the most pessimistic forecasters still expect mortgage rates in the mid-3% range for the rest of 2021.

If you’re among the millions of Americans getting back on their financial feet, don’t worry too much about following the markets. Stay on course to get your income and savings in order — and you’ll likely still have access to low rates when the time comes.

But if you are ready to lock now, you likely want to do so.

Find and lock a low rate (Apr 9th, 2021)

The Fed plans to maintain ‘easy money’ policies. But is it too lax on inflation?

Despite market movers that could drive mortgage rates higher, the Federal Reserve has promised it will maintain ‘easy money’ policies for the foreseeable future.

This is generally good news for mortgage shoppers.

The Fed has been working as a counterbalance to keep rates low even as the economy heats up.

The group currently purchases $120 billion in bonds per month, $40 billion of which are for mortgage-backed securities, the bonds that determine mortgage rates.

It’s also promised to keep the fed funds rate near 0% — which doesn’t affect mortgage rates directly but helps keep them in ‘low’ territory.

These actions kept mortgage rates at or near record lows over the past year.

The Fed’s lenient policies have pushed mortgage rates down over the last year. But in a weird twist, those same policies are now driving rates higher

But some economists worry the Fed’s current outlook is too lenient.

The big concern right now is that the Fed will let the economy run overly-hot — leading to high levels of inflation.

Why should mortgage borrowers care about inflation?

Because inflation leads to higher bond yields — and mortgage rates will follow suit.

Even fear of inflation can have the same effect. Investors bracing for higher inflation have already driven mortgage rates up from the 2s into the mid-3s.

The Fed is still willing to let inflation rise above its usual target of 2% in order to speed recovery — which is just beginning to ramp up. So borrowers shouldn’t expect this trend to reverse any time soon.

In other words, don’t expect rates to fall back to early-2021 levels. For the time being, today’s rates seem here to stay.

Lock in today's rates. Start here (Apr 9th, 2021)
    Related

The Fed to keep its benchmark rate low until 2023

The Federal Reserve has a few levers with which to keep rates low in the economy.

Discussed above are bond purchases, which have the biggest impact on mortgage rates.

But an indirect method of rate suppression is to keep its benchmark rate — the federal funds rate — near zero.

This rate level allows banks to borrow money at nearly no cost, which has a trickle-down effect on consumer borrowing and interest rates in general.

The Fed’s current rate-friendly stance is a boon for mortgage shoppers.

Federal Reserve forecast pre- and post-COVID. The Fed is predicting zero rate increases until at least 2023.

What does this mean for the personal finances of the average American consumer?

It means you’ll likely have access to ultra-low rates for years. Perhaps not as low as they are now, but very low from a historical standpoint.

Verify your new rate (Apr 9th, 2021)

Housing agencies nationwide are calling for rates in the low- to mid-3s for 2021.

Agency 30-Yr Rate Prediction
Freddie Mac 3.00%
National Assoc. of Realtors 3.10%
Fannie Mae 3.20%
National Assoc. of Home Builders 3.25%
Wells Fargo 3.55%
Mortgage Bankers Assoc. 3.60%
Average of all agencies 3.28%
Chart showing mortgage rates predictions for 2021 from six major housing finance agencies.

To sum it up, rate predictions vary widely.

Mortgage rates could stay near their lowest lows throughout the year. Or they could spike up to pre-2020 levels.

Mortgage strategies for April 2021

With mortgage rates on the rise, here are the strategies we believe to be most important for home buyers and homeowners in the coming months.

Buyers: It’s time to up the ante on offers

There’s no way around it — today’s housing market is intensely competitive.

Low mortgage rates have made home buying more affordable for the average American. But they’re a double-edged sword.

With rates low and Americans returning to work, the market is oversaturated with buyers and undersupplied with homes.

Housing inventory fell to a record low at the end of February. And homes that hit the market are selling in record time — just 20 days on average.

That doesn’t mean you should give up hope, though.

It just means you need to get smart about making an offer.

Buyers in today’s real estate market need to be informed and well-prepared if they want to get an offer accepted on their dream home.

How can you improve your chances?

  1. Get pre-approved for a mortgage before you make an offer. This is an absolute must, as most sellers and agents won’t even look at an offer without a pre-approval letter
  2. Don’t bid your entire pre-approved amount right away. You might think you should make your strongest offer right off the bat. But if your first bid is for your entire pre-approved loan amount, you won’t have any wiggle room to counter with a higher offer
  3. Don’t include too many contingencies. Contingencies slow down real estate transactions. In a hot market, sellers are more likely to accept an offer with fewer contingencies, so limit yours to what’s absolutely necessary
  4. Don’t skip the home inspection. This might seem tempting as it could help you move faster on your purchase. But if you skip a home inspection, you might think you’re buying a turn-key home only to end up with a fixer-upper
Start your mortgage pre-approval today (Apr 9th, 2021)

Use discount points to your advantage

Interest rates are rising, but savvy mortgage shoppers can still get a great deal.

Your first step is to shop with multiple mortgage lenders. Comparing rate quotes from at least 3 companies is the only ‘real’ way to find your best deal. You won’t know if a lender is offering you the best possible price until you’ve checked your options.

But there are other ways to lower your rate, too.

Discount points give you the power to ‘buy down’ your mortgage rate by paying extra at closing.

Doing so isn’t cheap. You’ll typically pay 1% of your loan amount to lower your rate by 0.25%.

But the overall savings can far outweigh the cost of discount points if you plan to stay in your home for 5 years or more.

Have your lender show you loan options with and without discount points so you can compare the upfront cost vs. long-term savings and see if buying down your rate is worth it.

April 2021 is a perfect time to cancel mortgage insurance

Home values skyrocketed in 2020. As 2021 progresses, homeowners will enjoy the dual blessing of rising home values and low rates.

This puts them in a fantastic position to refinance out of mortgage insurance.

Most home buyers don’t put down 20%. The average is more like 7%. But that means most first-time home buyers are paying some kind of mortgage insurance.

Mortgage insurance is not bad, but it’s not fun to pay, either.

Luckily, many homeowners now have 20% equity despite making only a 5-10% down payment not that long ago.

These homeowners can refinance into a conventional loan and get rid of mortgage insurance altogether.

This is true for those with private mortgage insurance (PMI) or FHA mortgage insurance (MIP).

It could save you hundreds of dollars per month.

If your home equity has skyrocketed in the last 12-24 months, it’s worth talking to a lender, who can let you know your chances of refinancing out of your mortgage insurance for good.

Check your eligibility to cancel PMI with a refi (Apr 9th, 2021)

Tap into home equity (wisely) while rates are low

Many homeowners are sitting on a mountain of home equity — but are they afraid to use it?

Homeowners cashed-out more equity in 2020 than they have any year since 2007. But the number of homeowners tapping their home’s value is still far below its pre-crisis heights.

In some ways this is smart. In the mid-2000s, we saw rampant borrowing against real estate and people cashing out homes every few months. This led to disaster.

But today’s homeowners are in a different position.

Not only can they benefit from record home values, but they’re protected by safe lending rules that make cash-out refinancing a very different prospect than it was in the early 2000s.

For the right person, a cash-out refi can have huge benefits. For instance:

  • Using a 3.25% mortgage loan to pay off credit card debt with a 20% interest rate
  • Consolidating auto loans, student loans, and other debts into one low monthly payment
  • Having the cash to make long-awaited home improvements that will increase your home’s value even further

You typically have to keep at least 20% equity in the home after the refinance (and better rates are available if you leave 25% equity).

So generally, a cash-out refinance might be worth it if you currently have about 35-40% equity and your home is worth around $250,000 or more.

Also keep in mind that most mortgages last 30 years, so you end up paying those debts longer.

But if your main goal is to reduce monthly expenses — or finance a big expense like home improvements at a low rate — a cash-out refinance could work wonders.

Check your cash-out refiance eligibility (Apr 9th, 2021)

Loan product rate updates

Many mortgage shoppers don’t realize there are different types of rates in today’s mortgage market.

But this knowledge can help home buyers and refinancing households find the best value for their situation.

Following are updates for specific loan types and their corresponding rates.

Conventional loan rates

Conventional refinance rates and those for home purchases trended lower in 2020, and are still very low in 2021.

According to loan software company ICE Mortgage Technology, the 30-year mortgage rate averaged 2.92% in February (the most recent data available), up only slightly from 2.91% in January.

But although this data is just one month old, today’s rate could look quite different.

Conventional mortgage rates rose in March, moving above 3% for the first time since July 2020 according to Freddie Mac’s weekly survey.

Keep in mind, though, average rates account for all sorts of borrowers.

One of the advantages of a conventional loan is that borrowers with higher credit and bigger down payments are rewarded with lower rates.

So even in a rising rate environment, ‘prime’ borrowers can often still find great deals.

Lower credit score borrowers can use conventional loans, too. But these loans are best suited for those with decent credit and at least 3% down.

Five percent down is preferable due to higher rates that come with lower down payments.

Twenty percent equity is preferred when refinancing.

With adequate equity in the home, a conventional refinance can pay off any loan type. Got an Alt-A, subprime, or high-PMI loan? A conventional refi can take care of it.

For instance, say you purchased a home three years ago with an FHA loan at 3.5 percent down. Since then, home prices have skyrocketed.

Because of your higher home value, you now have 20 percent equity, which means you could refinance into a conventional loan and eliminate FHA mortgage insurance.

This could be a savings of hundreds of dollars per month, even if your interest rate goes up.

Getting rid of mortgage insurance is a big deal in any mortgage market. This mortgage calculator with PMI estimates your current mortgage insurance cost. Enter a 20 percent down payment to see your new payment without PMI.

Find a low conventional loan rate. Start here (Apr 9th, 2021)

FHA mortgage rates

FHA is currently the go-to program for home buyers who may not qualify for conventional loans.

The good news is that you will get a similar rate — or even lower — with an FHA mortgage loan than you would with a conventional one.

Related: Read more about FHA costs and requirements on our FHA loan calculator page.

According to ICE Mortgage Technology, which processes more than 3 million loans per year, FHA loan rates averaged 2.86% in February, a little lower than the average conventional rate.

Another interesting stat from the report: About 20 percent of all FHA loans are issued to applicants with credit scores below 650.

FHA loans come with mortgage insurance. But the overall cost is not much more than for conventional loans.

A little-known program, called the FHA streamline refinance, lets you convert your current FHA loan into a new one at a lower rate if rates are now lower.

An FHA streamline mortgage application requires no W2s, pay stubs, or tax returns. And you don’t need an appraisal, so home value doesn’t matter.

Find low FHA rates. Start here (Apr 9th, 2021)

VA mortgage rates

VA loans come with the lowest rates of all loan types according to ICE Mortgage Technology.

In February, (the most recent data available), 30-year VA mortgage rates averaged just 2.60% while conventional loans averaged 2.92%, representing a big discount if you’re a veteran or service member.

Homeowners with a current VA loan may be eligible for the ever-popular VA streamline refinance.

No income, asset, or appraisal documentation is required.

If you’ve experienced a loss of income or diminished savings, a VA streamline can get you into a lower rate and better financial situation. This is true even when you wouldn’t qualify for a standard refinance.

Don’t overlook the VA loan for home buying. It requires zero down payment.

But don’t overlook the VA loan for home buying. It requires zero down payment.

That means if you have the cash for closing costs, or can get them paid for by the seller, you can buy a home without saving any additional funds.

VA mortgages are offered by local and national lenders, not by the government directly. Most active-duty members or veterans of the United States military can qualify.

This public-private partnership offers consumers the best of both worlds: strong government backing and the convenience and speed of a private company.

Most lenders will accept credit scores down to 620, or even lower. Plus, you don’t pay high interest rates for low scores.

Check your monthly payment with this VA loan calculator.

There’s incredible value in VA loans.

Check today's VA loan rates. Start here (Apr 9th, 2021)

USDA mortgage rates

Thanks to their backing from the U.S. Department of Agriculture, USDA mortgage rates are ‘below-market.’ That means you’ll typically get a lower rate with USDA than conventional financing.

And there are other benefits, too.

Like FHA and VA, current USDA loan holders can refinance via a “streamlined” process.

With the USDA streamline refinance, you don’t need a new appraisal. You don’t even have to qualify using your current income. The lender will only make sure that you are still within USDA income limits.

Home buyers are also learning the benefits of the USDA loan program for home buying.

No down payment is required, and rates are ultra-low.

Home payments can be even lower than rent payments, as this USDA loan calculator shows.

Qualification is easier because the government wants to spur homeownership in rural areas. Home buyers might qualify even if they’ve been turned down for another loan type in the past.

Like FHA and VA loans, the USDA program is for people who want to buy or refinance a primary residence; these loan programs aren’t for real estate developers.

Find a lock a low USDA rate (Apr 9th, 2021)

Mortgage rates today

While tracking monthly mortgage rate forecasts and weekly averages can be helpful, it’s important to know that rates change daily.

You might get 3.00% today, and 3.125% tomorrow. Many factors alter the direction of current mortgage rates.

To get a synopsis of what’s happening today, visit our daily rate update. You will find live rates and lock recommendations.

April economic calendar

The next 30 days hold no shortage of market-moving news. In general, news that points to a strengthening economy could mean higher rates, while bad news from economists can make rates drop.

  • Friday, April 2: Nonfarm Payrolls, wages, unemployment rate
  • Wednesday, April 7: March FOMC minutes released
  • Tuesday, April 13: Inflation Rate
  • Thursday, April 15: NAHB Housing Market Index, Retail Sales
  • Friday, April 16: Housing Starts, Building Permits
  • Thursday, April 22: Existing Home Sales
  • Wednesday, April 28: Fed interest rate decision, Fed press conference
  • Thursday, April 29: GDP Growth Rate, Pending Home Sales
  • Friday, April 30: Personal Income, Personal Spending

Now could be the time to lock in a rate in case these events push up rates this month.

Mortgage rates Q&A

Below are some of the most common questions about mortgage rates.

What are current mortgage rates today?

Mortgage rates as a whole are still at historic lows. But individual rates fluctuate based on market conditions and your specific situation. For instance, someone with a high credit score will get a lower rate than someone with a low score. 

Will mortgage interest rates go down in 2021?

Mortgage rates are more likely to rise than fall throughout the rest of 2021. According to our survey of major housing authorities such as Fannie Mae, Freddie Mac, and the Mortgage Bankers Association, the 30-year fixed rate mortgage will average around 3.28% through 2021. 

Can you negotiate a better mortgage rate?

Yes. Lenders have the flexibility to drop their rates and fees. Often, you must approach a lender with a better offer in writing before they will lower their rate.

Is 3.5% a good mortgage rate?

Historically, it’s a fantastic mortgage rate. But, rates are currently hovering lower than this for well-qualified applicants. The average rate since 1971 is more than 8% for a 30-year fixed mortgage. To see if 3.5% is a good rate right now and for you, get 3-4 mortgage quotes and see what other lenders offer. Rates vary greatly based on the market and your profile (credit score, down payment, and more).

Which mortgage company has the best rates?

Most companies have similar rates. However, some offer ultra-low rates to gain market share. Others have lower rates for FHA than conventional, or vice versa. The only way to know if your company is offering the lowest rate is to get quotes from various lenders. 

How much does 1 point lower your interest rate?

A point is a fee equal to 1 percent of your loan amount, or $1,000 for every $100,000 borrowed. Your interest rate could drop a quarter to a half a percentage point or more for each point paid. However, that can vary depending on the lender, loan characteristics, and borrower profile.

How can I avoid paying closing costs?

You can 1) request a lender credit; 2) request a seller credit (if buying a home); 3) increase your mortgage rate to avoid points; 4) get a down payment gift (which can be used for closing costs); 5) get down payment assistance. 

What do 10-year Treasury bond yields have to do with mortgage interest rates?

Treasury yields and mortgage rates are not directly linked, but they are strongly correlated. 10-year Treasury yields and 30-year fixed mortgage interest rates tend to move in lock step with one another. That’s because both products are bought on the secondary market by the same types of investors.

Mortgage rates are higher than Treasury yields because mortgages are inherently more risky. Interest rates for mortgages are based on prices for mortgage-backed securities (MBS). The same factors that drive MBS up or down usually drive Treasuries up or down, hence the common misconception that Treasuries drive mortgage rates.

Why do interest rates decrease during times of economic volatility?

The Fed doesn’t set mortgage rates, but its economic policies influence mortgage markets. In times of economic uncertainty, the Fed promotes lower interest rates to encourage more borrowing which helps stimulate the economy. Lower rates can also raise home values which bolsters many Americans’ net worth.

Can I refinance even if my home is in forbearance?

If you entered into mortgage forbearance because of the coronavirus pandemic, you may be able to qualify for a refinance after exiting your forbearance plan. If you missed payments during forbearance, you’ll have to make three consecutive on-time payments before qualifying for a conventional refinance, according to FHFA’s rules.

What are today’s mortgage rates?

Low mortgage rates are still available. You can get a rate quote within minutes with just a few simple steps to start.

Verify your new rate (Apr 9th, 2021)

Selected sources:

  • https://www.icemortgagetechnology.com/mortgage-data/origination-insight-reports
  • https://tradingeconomics.com/united-states/calendar
  • https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
  • http://www.freddiemac.com/research/datasets/refinance-stats/index.page