See more of the story

Mortgage rates were historically low for most of 2020, but as the pandemic recovery gathers steam, that is changing. Rates have mostly been climbing in 2021, and that trend is likely to continue through the year as more folks get vaccinated and back to work.

But that doesn't mean mortgages are about to become unaffordable either. Many people will still be able to secure great loan rates compared with pre-pandemic times, and millions of homeowners could still potentially save by refinancing their loan before rates move even higher.

The economy is complicated, so there isn't a totally cut-and-dried explanation for why mortgage rates were so low last year, but the simplest way to understand it is because Treasury rates went down.

"Mortgage rates typically follow the 10-year," said Joel Kan, associate vice president at the Mortgage Bankers Association (MBA). "This hit to the Treasury rates came at a time when we already started to see rates come lower in the beginning of 2020 and there was already the start of some refi wave."

MBA predicts that the average rate on a 30-year fixed loan will be 3.6% by the end of 2021. But the rise shouldn't be quite as sudden as the falloff was last year.

As businesses reopen and consumers start spending more in the hospitality sector again, mortgage rates are likely going to keep climbing gradually throughout the year.

Increasing consumer demand may squeeze supply chains and result in more inflation. The result is almost certain to be higher mortgage rates ahead.

For home buyers, rising rates shouldn't have as big an impact as increasing prices. An ongoing housing shortage has made for a strong seller's market, and although mortgage rates are gradually climbing, the bigger squeeze for housing affordability seems to be coming in the form of competition from other buyers.

Many millions of homeowners could still benefit from refinancing. But it's not quite that simple. Data firm Black Knight reported this month that 11 million homeowners stand to save by refinancing, but that doesn't mean the savings make the process worth it for all those borrowers.

"If I have 10 years left and I refinance into a lower rate but that adds another 5, 10, 20 years to my mortgage, is that worth it to me?" Kan said. "Yes we could look at how many borrowers out there could refinance," but there are other factors to consider.

Aside from borrowers who are close to paying off their current loan, it also doesn't make sense to refinance if you could move and turn a profit on the house. Because competition among buyers is so high, for some it may make sense to use this opportunity to upgrade or downsize instead.