Expecting even lower mortgage rates before refinancing? It’s risky

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Expecting even lower mortgage rates before refinancing?  It's risky

Expecting even lower mortgage rates before refinancing? It’s risky

Maybe US homeowners not know the deal well when they see it.

While mortgage rates are still constrained by the economic uncertainty caused by the pandemic, demand for mortgage refinancing is falling, according to a poll by the country’s largest mortgage association.

Falling demand for refinancing is hard to imagine. Average rates on the most widely used US mortgages remain at well below their historical averages, and significantly lower than they were just two years ago.

With the economy showing signs of life, even as the delta variant of COVID rages, those rates – and the opportunity to save on what might be the most expensive purchase of your life – are short-lived.

Drop in mortgage applications due to refinancing

Application for a mortgage loan agreement with a key on a house shaped key ring

Brian A. Jackson / Shutterstock

Overall mortgage activity fell 2.4% last week, according to the Mortgage Bankers Association. just informed

The decrease was caused by a 4% drop in refinancing applications. Refi demand is still strong – it accounted for 66.7% of all mortgage activity last week and a 2% increase over a year ago – but the significant decline week after week might seem surprising given that mortgage rates on – still low.

According to an MBA study, the average for a 30-year fixed-rate home loan remained stable at 3.03% last week. Rates are lower, but also unchanged, in the mortgage giant’s weekly survey. Freddie Mac: He has 30-year loans with an average rate of 2.78% this week.

Joel Kahn, an MBA forecaster, attributes the decline in refinancing rates to homeowners looking for even better deals.

“Despite the low rates, refinancing applications have declined, and some borrowers are still waiting for rates to fall even lower,” Kahn said in a statement. “Recent Uncertainty Around the Economy and the Pandemic kept rates low over the past month, so the refinancing index has fluctuated around these levels. “

In addition, many homeowners have already refinanced, said Corey Burr, senior vice president of TTR Sotheby’s International Realty in Washington, DC.

“Mortgage activity will only pick up if rates fall by a quarter or half a percent,” Burr says.

But how likely is it?

Signs point to higher mortgage rates

Housing and real estate market concept with graph

reezuan / Shutterstock

If Kahn is right and homebuyers are waiting for further rate cuts before refinancing, they could be making a risky bet.

While it is true that the early waves of COVID-19 hurt the U.S. economy, the reason was that state and local politicians restricted business activities to try to control the virus. Now there is no desire to do the same, although, according to some estimates, new cases of COVID reached an eight-month high

Businesses are not only opening but also hiring. The government said nearly 1.8 million jobs were created in the United States in June and July. If people work, they spend – and if they are spending money, the country’s recovery from the pandemic must continue.

The combination of large jobs and abnormally high inflation could force the Federal Reserve to wind down a couple of programs that helped ease the pressure on mortgage rates.

During the pandemic, the Fed bought billions of dollars in Treasury bonds and mortgage-backed securities every month, which stabilized the economy and indirectly lowered mortgage rates. As soon as Fed policymakers start cutting back on their purchases, mortgage rates should start to rise.

How high they will rise, and how quickly they will rise, remains to be seen.

“Only a crystal ball can tell us this at this point,” says Burr.

Get low while they last

Happy young married couple signs a contract, makes a successful deal, smiling young husband with glasses, signs legal documents, buys a new house, takes out a loan or mortgage

fizkes / Shutterstock

If you’re a homeowner with little capital stock and a decent credit rating, refinancing can save you tons of money. A recent Zillow report It found that nearly half of homeowners who refinanced between April 2020 and April 2021 now save $ 300 or more each month.

But getting the lowest possible mortgage rate that saves you the most money usually requires little effort.

Lenders want to do business with people they consider low-risk. They won’t look at you that way if you have a bunch of pesky high-interest debt. So, consider combining them into one, low interest debt consolidation loan

When it comes time to apply for refinancing, don’t just go to the first lender who claims to offer “the best rates.” They almost all say that. Instead of, compare rates of at least five lenders to find the best deal for your area and for the person with your credit profile.

And if refinancing doesn’t work for you, you can still lower the cost of home ownership by paying less for homeowner insurance. When it’s time to extend coverage, small shopping comparison can save hundreds of dollars a year.

The same strategy can guarantee you don’t overpay on auto insurance, too.

This article provides information only and should not be construed as advice. Provided without warranty of any kind.

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