The latest survey from the Mortgage Bankers Association was released yesterday and contained great news for homeowners contemplating a mortgage refinance -- interest rates hit their lowest levels since June 2013! That means those who have been waiting for mortgage refinance rates to drop may be able to lock in substantial savings. And many, says the MBA, are doing exactly that -- refinance activity increased to 59 percent of total home loan applications, the highest level since February 2014.
Mortgage Refinance Rates Fall
Per yesterday's release, these are the average mortgage rates borrowers were able to obtain. Actual rates for individuals may be higher or lower, depending on the strength of the loan applicant.
- The average mortgage interest rate for 30-year fixed-rate conforming home loans ($417,000 or lower) dropped to 4.20 percent, the lowest since June 2013, with total points lowering to 0.17 from 0.19 for 80 percent loan-to-value ratio loans.
- The average home loan rate for 30-year fixed-rate jumbo mortgages (greater than $417,000) was even lower -- down to 4.14 percent, the lowest since May 2013, from 4.21 percent, with total points decreasing to 0.10 from 0.29 for 80 percent loans.
- The average mortgage rate for 30-year fixed-rate FHA home loans decreased to 3.90 percent, the lowest since June 2013, from 4.00 percent, with total points decreasing to 0.08 from 0.15. This rate does not include mortgage insurance.
Considering a Refinance? Don't Blow It!
If you're thinking about a refinance, you should understand a couple of facts. First, economic factors point to strengthening markets, inflationary concerns and increasing rates, and you could get caught out if waiting for rates to go even lower. For example:
- The Bureau of Labor Statistics says that job growth has exceeded 200,000 payrolls in seven of the first nine months of 2014. The economy finally seems headed in the right direction. That was backed up by the October 16, 2014 weekly unemployment report, which indicated that many fewer claims were filed than expected. That points to rising rates.
- The Fed is already tapering off its bond purchase program that helped force mortgage rates lower than they would have otherwise been. When the Fed takes its next step, selling the bonds it purchased as part of the program, mortgage rates will be pressured higher.
In addition, mortgage rates tend to increase much more quickly than they fall. Anyone waiting for the "bottom" of the market must realize that it's impossible to pinpoint the bottom until rates begin rising again. When that happens, the market can get away from you in a flash. This is because lenders, like investors everywhere, are fear-driven. They are more unwilling to reach for higher profits if it means risking potential losses. Rates tend to drop gently downward but jerk up very quickly -- frequently higher and faster than strictly necessary.
Get Ready to Pull the Trigger
If you're thinking about refinance, select a lender now based on the competitiveness of its rates as well as its ratings from other customers. Get your refinance pre-approved -- at least everything but the appraisal -- and be ready to lock in and close quickly. Shorter rate lock periods come at lower cost and allow you to get the best refinance rate possible. The worst thing you can do is wait until rates drop into your range, then start contacting lenders who will be experiencing high volume, and try to close a loan quickly from scratch. It will be much harder to get what you want.