Mortgage Rates 2011 – Predictions From 6 Experts

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While housing prices are still dropping, mortgage rates are creeping higher. How high will they go in 2011? Here's Stacy's prediction, along with a round-up of others.

While some experts are predicting that home prices will stabilize and perhaps even go up this year,  the latest news isn’t encouraging. Yesterday’s release of the Standard & Poor’s/Case-Shiller 20-city home price index revealed prices dropped an average of 1.6 percent from November 2009 to November 2010.

But nothing goes down forever, and lower home prices are obviously good if you’re a buyer – especially if the next most important part of the home-buying equation, mortgage rates, are also low.  As I write this, the average rate on a 30-year fixed mortgage is 4.8 percent.  So where will they go from here?

That depends on who you ask. I’ve scoured the web for mortgage rate forecasts and have come up with several.

One of the most often-quoted sources for mortgage rates is the Mortgage Bankers Association. Here’s what they predicted for 2011 30-year fixed rate loans. This is their most recent forecast, published on Jan. 11, 2011.

  • First quarter 2011 – 5.2 percent
  • Second quarter 2011 – 5.3 percent
  • Third quarter 2011 – 5.4 percent
  • Fourth quarter 2011 – 5.5 percent

But before you put too much faith in this organization’s ability to tell the future, check out the prediction they made in this press release just a few months ago: Oct. 26,2010…

“Fixed mortgage rates are expected to average about 4.4 percent in the fourth quarter of 2010, increase to 5.1 percent by the end of 2011, and head towards 5.7 percent in 2012.”

So just since October, the MBA has raised their forecast from 5.1 to 5.5 percent by the end of this year.  How did they do at predicting 2010? Not so hot. Here’s the prediction they made in late 2009 for 2010 mortgage rates…

“…the average interest rate on a 30-year fixed-rate mortgage will be 5.3 in the first quarter of 2010, 5.5 percent in the second quarter and then 5.6 percent and 5.7 percent in the third and fourth quarters, respectively.”

Hmm…this prediction was not only off (rates averaged below 5 percent in 2010) but eerily similar to the prediction they just made for 2011.

But you can’t berate the forecasters too much – predicting things like mortgage rates means guessing the unknowable. Where mortgage rates will ultimately go depends on things like the pace of the economic recovery, the continuation of government programs like the Fed’s quantitative easing strategy and a slew of other factors.

With that in mind, here are a few more predictions:

Greg McBride at BankRate predicts higher rates, trending closer to 6 percent in the second half of the year:

“What I expect we’ll see in the first part of 2011 is mortgage rates hopscotching back and forth over that 5 percent mark, but provided the economy continues to improve, we’ll see mortgage rates trending higher as the year unfolds. I wouldn’t be at all surprised to see mortgage rates above the 5.5 percent mark and the high 5s by the second half of 2011.”’s Randy Johnson — no relation to Stacy — says there’s no way to tell at all, but rates are probably as good as it gets right now:

“Interest rates will continue to be volatile because we just don’t have answers about where this economy is headed. …  Assuming that rates stay in some kind of moderate range – like between 4.25 percent and 5.25 percent –  the affordability index will continue to be better than it has in decades.”

In this recent Yahoo article, mortgage guarantor Freddie Mac’s chief economist had this to say:

“The bottom in rates is behind us,” says Frank Nothaft. “That’s not to say today’s rates are high. They’re not. Aside from what we experienced the last couple of months, these are the lowest rates we have seen since the 1950s.” Still, Nothaft says, “I do think they will be higher at the end of 2011 than (the end of) 2010.”

And one more prediction from the same article, this time from LendingTree

Cameron Findlay, chief economist at LendingTree, believes 30-year fixed rates will rise to about 5.25 percent in 2011. “We don’t expect any significant rise from that point,” Findlay adds.

Who’s right? Only time will tell. But it does seem that if you mash all these predictions together, you’ve got rates rising gradually this year, but staying at historically attractive levels. Keep in mind, however, that these rates are for those with the highest credit scores.

If you’re one of many considering buying a home this year, we have lots of help for you. First and foremost, check out our mortgage search to help you find the best mortgage deals in your area. Then check out some of our other mortgage and real estate stories, including…

Stacy Johnson

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