Freddie Mac Predicts $3.9 Trillion in Mortgage Originations in 2021

by Maurie Backman | Published on Aug. 30, 2021

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Couple holding keys to new house embrace in foreground, boxes in background.

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Mortgage activity is not expected to slow down this year.

There's a reason borrowers have been clamoring to get mortgages this year. Mortgage rates have been sitting at attractive levels since January, and they're not expected to rise anytime soon. In fact, Freddie Mac predicts that the average 30-year fixed-rate loan will be 3.1% in 2021. That's a notch higher than last year, when rates dropped to record lows, but it's still quite competitive on a historic basis.

Freddie Mac also expects mortgage originations this year to total $3.9 trillion. That's an increase from its $3.5 trillion forecast in April. In fact, Freddie expects so much mortgage activity this year that for 2022, it sees activity declining to $2.6 trillion.

Should you get a new mortgage this year?

From a mortgage rate perspective, now's a great time to buy a home. But from an inventory and home price perspective, the opposite is true.

Housing inventory has been extremely limited this year, and that's been problematic for buyers. Limited inventory means you'll have fewer properties to choose from, so you may have a hard time finding a home that meets your needs. And also, low inventory is contributing to higher home prices.

If you buy a home today, you're likely to pay a premium for it. Or, to put it another way, you'll get less bang for your buck. And while you might reap some savings via a lower mortgage rate, the amount you pay for a home may be high enough to wipe those savings out.

On the other hand, when Freddie Mac says it anticipates $3.9 trillion in mortgage originations, it's not just talking about loans to purchase a new home. It's also talking about refinances.

While today may be a challenging time for a new home purchase, it's a great time to refinance. Rates on refinances are very competitive, and you may be able to lower your housing costs substantially by swapping your existing home loan for a new one with more favorable terms.

That said, you'll need to make sure refinancing makes financial sense before going that route. Generally, your goal should be to lower the interest rate on your mortgage by about 1% (or more) in the course of a refinance. If you already have a low rate in place, it may not be worth it to get a new loan and pay the closing costs.

And speaking of closing costs, you'll also need to make sure you intend to stay in your home long enough to reap savings after paying them. If you'll be charged $6,000 in closing costs to lower your monthly mortgage payments by $200, that means you're looking at a 30-month break-even period. If you're planning to move within three years, refinancing won't make sense.

Ultimately, Freddie Mac thinks we're looking at a busy year in the world of mortgages. And if rates stay close to where they are now, we can bank on a lot of people applying for new loans or swapping their existing mortgages for better ones.

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