Where is the bottom?
Freddie Mac’s primary mortgage market research this week shows that the 15-year fixed loan hit an all-time low of 2.1% at a cost of 0.7 points.
A year ago, during the first wave of COVID-19 caused by refinancing mania, the figure was 41 basis points higher in 15 years, up 2.51%.
The fixed rate for 15 years is currently available in California at an interest rate of 1.75% if you are willing to pay a few points. Since the size of California mortgages is much larger, mortgage prices are always better than the national Freddie polls.
According to Freddie Mac, the average 30-year fixed income is currently 2.8%, just 15 basis points higher than the Jan. 7 record low of 2.65%.
Before I explain what’s going on, let me eat the crow first.
Just two months ago, I wrote a column predicting that the 30-year fixed rate would hit 3.5% by the end of the year. According to historical data from Freddie Mac, there have been only a few times in the past 50 years that mortgage rates have risen by about three-quarters of a percentage point in five months.
In most cases, this happened during severe hyperinflation. The inflationary pressures we face today are far from hyperinflationary. So the chances that we will have 3.5% by the end of the year are negligible and equal to zero. This is a crow.
It is obvious and completely unexpected that a new variant of the COVID-19 virus called Delta has hit many parts of America. The number of new cases is growing rapidly. Disguise is again a new mandate.
Uncertainty will never benefit the economy. Uncertainty leads to lower rates. Are we going back to lockdown mode? When will this new strain be contained? What’s next? Will we see a wave of some other option when this one comes to an end?
Here’s what we do know: Federal Reserve Chairman Jerome Powell announced on Wednesday July 28 that the Fed will continue to buy at least $ 40 billion in mortgage-backed securities every month until significant progress is made towards achieving goals of maximum employment and price stability.
Remember Fannie and Freddie waived the half-point commission on refinanced mortgages a few weeks ago. This allows borrowers to save $ 2,500 on a $ 500,000 loan.
America had $ 8.1 trillion in net worth in the first quarter of the year, according to Black Knight.
Black Knight’s Optimal Blue refinancing rate lock data shows that 42% of all rate locks were related to cash out refinancing in the first three weeks of June.
As of July 21, Black Knight data shows nearly 14 million borrowers can save nearly $ 300 a month through refinancing. Of these, over 1.8 million were in California. The estimated savings for California refinancing borrowers were even higher at over $ 400 per month.
Local refinancing activity has been remarkable over the past few years.
According to Attom Data Solutions, refinancing in Los Angeles, Orange, Riverside and San Bernardino counties has increased by 10-20% every quarter since the first quarter of 2019 until December 2020. The exception was the first quarter of 2020, when sales volumes declined due to the first strike of COVID-19.
If you are looking to get cash, you should determine if you are better off refinancing your first mortgage or getting a home equity line of credit or HELOC.
Generally, if you have a really good bet right now and don’t want to spend a lot of money, HELOC might be your best bet. Most banks charge nothing for receiving HELOC.
The downside of HELOC is that rates and payouts can be adjusted monthly.
If you want to lower the rate you pay on a fixed loan, you should be able to get around 2.875% on a 30-year fixed and 2.375% on a fixed 15-year with no closing costs. This assumes excellent income, credit and equity.
The biggest break is if you can go from a fixed 30-year to a 15-year fixed. You can usually lower your interest rate by 0.5% by taking out a short term mortgage.
Freddie Mac appreciated the news: The 30-year fixed rate averaged 2.8%, up 2 points from last week. The 15-year fixed rate averaged 2.1%, a record low of 2 basis points lower than last week.
The Mortgage Bankers Association reported a 5.7% increase in mortgage applications over the previous week.
Bottom line: Assuming that the borrower receives an average 30-year flat rate on the corresponding loan of $ 548,250, last year’s payment was $ 55 more than this week’s payment of $ 2,253.
What do I see: Locally, highly qualified borrowers can obtain the following fixed rate mortgage loans at no additional cost: 30-year FHA at 2.5%, 15-year standard at 2.375%, 30-year standard at 2.875%, 15-year standard high balance ($ 548,251 to $ 822,375) at 2.5%, a 30-year regular high balance at 3.125%, and a 30-year fixed large balance at 3.25%.
Eye-catching Credit of the Week: Fixed mortgage for 15 years at 1.75% and a cost of 1.625 points.
Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or email@example.com. His site www.mortgagegrader.com…