Why Baltimore Mortgage Rates Are So Low Right Now?

Overhead of suburban neighborhood purchased with best mortgage rates in Baltimore MD

With 2021 underway, many of us are hoping that the volatility of the previous year will begin to even out. The pandemic not only created a dire public health crisis but threw many industries into chaos, including construction, and real estate. What many experts didn’t predict was a run on home buying, fueled by record-low mortgage rates. With stability expected to return, what can we expect about Baltimore mortgage rates to round out the remainder of 2021?

The Current State of Things

December and January of 2020 saw record-low mortgage rates. Data released in early December by Freddie Mac found that the most popular mortgage option, 30-year fixed-rate loans, had fallen as low as a 2.71% average. This was the lowest number recorded by the mortgage-titan since they began tracking rates in 1973. A year prior in December 2019, that rate was a 3.68% average. Since the outset of the new year, rates have risen slightly, up to 2.875% as of April 27th. However, even this slight increase still represents a standstill near historic lows, leading to a cascading effect in other industries such as lumber production as home builders struggle to get the materials they need to keep up with demand. There are a variety of factors that have gone into producing the current situation, many driven by the COVID-19 pandemic. The Federal Reserve’s effort to reinvigorate the economy led to their purchasing of mortgage-backed securities, or MBS. This is a method of bundling 30-year loans with other loans and offering the packages to investors. As noted by The Washington Post, “Interest rates for loans are usually based on MBS prices. When MBS prices go up, secondary market prices go down. The Fed’s unlimited MBS buying has been pushing prices up and driving down rates.” Low mortgage rates have led to a binge of home buying, creating a seller’s market and skyrocketing home prices across the country.

Where Do Baltimore Mortgage Rates Go From Here?

The lingering question on most of our minds is surely, where do the mortgage rates go from here? The truth is, there is uncertainty right now. However, the best bet from many industry economists is a return to a healthy housing market that is not tipped towards either extreme of the mortgage-rate spectrum. Because, while low rates may seem to be ideal to you as a homebuyer, you have to be prepared for steep competition. Low rates have caused prices to soar across the country. The simple fact is, supply is limited at a time when demand is huge. Across the country, from Philadelphia to Charlotte to Utah, reports continue to emerge about competitive housing markets, buyers attempting to outbid each other far above asking prices, and more demand-driven issues. These issues are no different in the Baltimore and DC areas.

So, we can see how historically low mortgage rates can actually disadvantage the average homebuyer who isn’t interested in outbidding tens of others to get the home of their dreams or being forced to settle for a subpar option when they could afford something better in a more stable market. The fear many have right now is that the market may be approaching another crash. However, experts don’t predict that to be the scenario, and instead, foresee a stable market on the horizon. Business Insider spoke to one expert who named several key reasons. First, construction is set to catch up to demand. Currently, limited demand means high home costs and unpredictable mortgage rates, but once homebuilders catch up, the market should even out. Another important aspect is that mortgage rates should eventually even out. The low rates we’ve discussed previously should rise steadily, which means the market will be more easy-to-navigate for well-qualified homebuyers.

What Does This All Mean for Me?

It is true that Baltimore mortgage rates are historically low right now. However, these mortgage rates have contributed to, and been a product of, an unpredictable real estate market that can create difficulties for some buyers. However, getting the home of your dreams right now isn’t an impossibility. You just need a qualified team of experts in your corner to help you navigate the process. The team at Federal Hill Mortgage are the top-ranked mortgage brokers and lenders in Maryland. By coming prepared and shopping smart with pre-approval, you can help tip the scales to purchase the home of your dreams right now.

If you’re ready to get started, apply now.

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Federal Hill Mortgage

Federal Hill Mortgage

The Federal Hill Mortgage Team is here to supply you with all the information you need to shop for a mortgage that's right for you.