April 26, 2021
With mortgage rates recently hitting a nine-month high you may be wondering if it’s too late to refinance. An important fact to keep in mind is that although mortgage rates have begun to rise, they are still historically low. To help you decide if your timing’s right, here are five things to know regarding when to refinance.
The answer to that question can vary depending upon everything from your personal financial situation to current housing market conditions. Of course, the adage, “the lower the rate the lower the payment” is generally always true. However, when attempting to answer this question it’s also very important to consider rates from a historical perspective. Consider that in October 1981 the mortgage rate peaked at 18.63%, or that it averaged 5.94% in the 10 years ending January 2011, and it’s easy to see how rates are still near historic lows. As a result, many homeowners are deciding that it’s prudent to refinance now rather than waiting.
According to the latest data released from Freddie Mac, the 15-year fixed-rate and the 30-year fixed-rate fell from the week before. The 30-year fixed-rate average for this week of 3.04% is well below the 52-week high of 3.58%, though higher than the 52-week low of 2.93 percent. However, compared to the average mortgage rate in 2000 of 8.05% it becomes easier to understand how rates are now historically low. As a result, many forward-thinking homeowners are deciding that refinancing today still makes good sense.
Mortgage rates rise and fall because of market forces and fluctuate based on both the current and anticipated rates of inflation. Other factors that can impact mortgage rates include corporate earnings and new home sales. Rates tend to fall during economic recessions as evidenced in 2020 and into 2021. Rising employment levels can also be a catalyst for upward movement in mortgage rates. According to Yahoo Finance, new weekly jobless claims were higher last week after recently hitting the lowest levels since the start of the pandemic.
An individual’s mortgage rate can also be impacted by personal factors including the borrower’s credit score and their loan-to-value ratio. Lenders can adjust an individual’s rate depending upon how risky they determine a loan to be including how much they stand to lose in the event of default.
Mortgage rates recently increased for seven consecutive weeks and hit a nine-month high before dipping slightly last week, and as we have seen, the current rate is still lower than historic averages. Much like the unpredictability of the stock market, no one can say for sure where rates are headed next. If history is any indication, they will eventually increase to historic norms. We can conclusively say that mortgage rates have gone up over the last two months and are just under their high for the year. This fact has compelled some borrowers to lock in today’s rate while it’s still below the average rates of the last few decades.
Whether rates go up or down is always the “$64,000 question.” No one knows for sure if rates are headed lower, though last week for the first time in eight weeks mortgage rates dipped slightly lower. Mortgage rates can be very unpredictable and as historic rate charts demonstrate they can rise quickly. Even if rates do not dip down any further, they remain near historic lows. The good news for those who have waited to refinance is that they still have a window of opportunity to potentially save thousands.