A funny thing happened on the way to a predicted slight increase in mortgage rates in mid-August 2015. Interest dropped to the lower end of the narrow band in which it's fluttered this summer. On August 19, the Fed seemed to hold back on a predicted increase, apparently falling back on its policy to hold the line when economic conditions warrant it.
On the same day as the Fed "non-action" on the 19th, the fixed 30-year mortgage rates on average dropped two points from the previous week to 4.11. Consumers can choose among any number of mortgage pundits urging cautious optimism, suggesting it may be a good time to lock in rates. This week, LendingTree recommended:
- Lock if closing in 7 days: Rates may be heading up
- Lock if closing in 15 days: Rates may be heading up
- Lock if closing in 30 days: Rates may be heading up
Mortgage Rates Today
Consumers should have a look at mortgage rates today to determine if it's time to buy or refinance. Last week Freddie Mac published its July outlook, projecting an increase on 30-year fixed rate mortgages from a half percent to a full point by the second quarter of 2016.
Meanwhile, consumers reacted to the flutter of rates by applying for 3.6 percent more new-purchase and refinance mortgages than in the previous week, according to Reuters. Effects from the Chinese economy sparked the slight rise last week, Reuters says, but consumers rebounded as the rate leveled out, with refinance loan requests matching the annual highs recorded last spring.
Locking in Rates: Are You In or Out?
Trends can cause more trends. The rippling effect of news that rates are rising can cause some fence-sitting consumers to panic into a new mortgage or refinance. Some prospective borrowers fear waiting too long to see an upward trend before pulling the trigger on a new loan. Borrowers with excellent credit may be eligible for good rates despite a relatively high DTI ratio. However, others may find their ability to get a good rate compromised if their DTI increased during the hiatus above levels required by lenders.
There are other significant variables that factor into making an informed decision on locking in rates, including the economy, property location, individual, credit score, loan-to-value ratio, mortgage points and closing fees, and lender's policies. For example, some of today's lenders may relax some contingencies, allowing borrowers to make large down payments to offset lower credit scores. Still, according to Freddie Mac, "previous research has found that reduced down payments can increase the relative probability of homeownership among some (economic) groups by over 25 percent."
Summing up, Freddie Mac noted that the U.S. economy will not reach the goals of full employment and a fully recovered housing market without stuttering starts and stops. The variables make it imperative for consumers to monitor the numbers, shop for bids at the current rates and, at the same time, use LendingTree's mortgage payment calculator to determine their financial worthiness. At least for this week!