With predictions that mortgage rates are expected to start rising before the end of the year, the opportunity for homeowners to save money by refinancing their home loans will soon disappear.
There is still time to act, however. After remaining virtually frozen for weeks due to the economic uncertainty triggered by the pandemic, the rates on some of America’s most popular mortgage products have fallen again, according to a survey by one of the top enablers of mortgages in the country.
This means another period of historically low mortgage rates. But how long it will last – a few days, a few weeks – is impossible to know.
30-year fixed mortgage rates
The average interest rate on a 30-year fixed mortgage fell from 2.88% to 2.86% last week, according to mortgage giant Freddie Mac reported Thursday.
Even though the change has been minimal, it’s still more activity than rates have seen in some time.
âIt’s groundhog day for mortgage rates because they’ve been basically flat for over two months,â said Sam Khater, chief economist at Freddie Mac. “The rate maintenance model reflects market sentiment that the outlook for the economy has darkened somewhat due to the rebound in new COVID cases.”
When it comes to the impact they are having on mortgage rates, today’s clouding outlook is simply not on par with the general panic that has led to the shutdown of much of the US economy last year. And the good economic news has more of an impact on mortgage rates than the bad ones.
Consider this: August Employment Report, released on September 3, was particularly disappointing, with just 235,000 jobs created this month. Since then, the 30-year fixed rate has barely budged. In contrast, July’s much brighter jobs report resulted in an almost immediate 0.1% increase in the 30-year average fixed rate.
It doesn’t take an overwhelming amount of positivity to jack up rates.
15-year fixed mortgage rates
The average rate on 15-year fixed-rate mortgages fell more last week, from 2.19% to 2.12%. At the same time a year ago, the 15-year fixed rate averaged 2.35%.
The 15-year drop is especially good for homeowners considering refinancing. The shorter term means you’ll pay less interest over the course of your loan and own your home sooner than if you opted for a 30-year term.
A shorter loan term means higher monthly mortgage payments, which means 15-year mortgages aren’t for everyone. But the savings mean they are worth examining.
It’s important to remember that Freddie Mac’s numbers are just an average, which means there are lenders. offering even lower rates than what Freddie reported.
5/1 adjustable mortgage rates
Contrary to the trend of minute declines, five-year variable rate mortgages, or 5/1 ARMs, saw their rates rise last week.
The average rate on a 5/1 ARM dropped from 2.42% to 2.51%. Even though ARM rates are on the rise, they are still much lower than they were around this time last year, when they were on average 2.96%.
ARMs are interesting products. Your interest rate is fixed for the first phase of the loan, but it adjusts, up or down, periodically thereafter.
A 5/1 ARM, for example, begins with a fixed period of five years. Your rate will be adjusted by your lender each year thereafter.
Rates will increase
We don’t know exactly when this will happen, but the end of low mortgage rates and the windfall it has sparked for millions of homeowners is coming.
Freddie Mac’s most recent rate forecast calls for an average of 3.1% of the 30-year fixed rate this year, implying a steady increase over the next three months. Industry group Mortgage Bankers Association predicts that the 30-year fixed rate will reach 3.3% in the fourth quarter of 2021 – and 4% in the third quarter of 2022.
Much of what happens to rates depends on the future actions of the Federal Reserve.
The Fed has helped keep mortgage rates low in two ways: by keeping its benchmark interest rate, called the federal funds rate, close to zero; and buying billions of dollars in bonds and mortgage-backed securities.
The federal funds rate is unlikely to budge until the economy is COVID-free – great news if you have an adjustable rate mortgage – but the Fed could start cutting its buying program before the end of the month. the year.
Corey Burr, senior vice president of TTR Sotheby’s International Realty in Washington, DC, expects the Fed’s cut to increase the value of 10-year Treasury bonds, which directly affects fixed mortgage rates, from about 0.5%.
âAs a result, there will be a corresponding 0.5% or 0.625% increase in mortgage rates,â Burr predicts.
How to get a good rate from your lender
To make sure you refinance your mortgage at the lowest possible rate, it’s worth shopping around. Lenders can offer very different rates, so rather than going with the first one to promise “the lowest rates in the market,” take a few moments to compare the rates of at least five lenders and find out who offers the best rate for your budget.
Convincing a lender to offer you a low rate requires a solid credit history. Take a quick, free look at your credit score and see if you would benefit from a little credit rehabilitation before asking for your refi
Once you’ve refinanced your mortgage, you can use the savings to boost your overall finances, either by pay off the debt or by investing through an app that helps you build your portfolio just using “spare currency”.
If refinancing isn’t your thing or isn’t right for you, you can still lower the cost of homeownership. When the time comes to renew your home insurance, obtain quotes from several insurers. It’s a quick and easy way to make sure you’re not paying too much for your coverage.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.