Now May Be The Time To Refinance
Has the bubble burst for homeowners looking to score great refinance deals? Not yet, say financial and lending experts, but the clock may be ticking. The Federal Reserve is poised to raise interest rates several times during 2022, which could impact the availability of lower refi rates.
Mortgage rates remain at historic lows, and far below the levels recorded months before the COVID-19 pandemic hit. But according to the Mortgage Bankers Association (MBA), the demand for mortgage refinance rates has fallen significantly in recent months. During the week of December 10, 2021, overall mortgage applicants fell by 4%, a 6.4% decrease in total refinance activity.
During the COVID surge, mortgage rates hit all-time lows. But with most Americans vaccinated, and many rolling up their sleeves to get additional booster shots, it’s unlikely that the country will be looking at another major economic disruption that would result in mortgage rates falling again.
So how to explain the refi decline? Some homeowners might be delaying their refinancing because they’re holding out for even lower rates – a gamble that may not pay off.
Why You Shouldn’t Wait To Refi
Joel Kan, the MBA’s forecasting chief, sounds a note of caution for those holding off on refinancing their mortgages.
“If rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller,” says Kan.
Corey Burr, senior vice president at TTR Sotheby’s International Realty in Washington, D. C., says that, “In order for mortgage rates to fall to the levels seen in early 2021, there will need to be a lot of talk about the ‘R’ word: recession.” Inflation, however, and not recession, seems to be word on everyone’s lips. In November 2021, prices rose at the fastest pace since 1982, prompting the Fed to signal the possibility of at least three interest rate hikes during 2022.
In addition, America’s central bank announced plans to slowly wind down its COVID-era efforts in terms of buying mortgage-backed securities and Treasury bonds in order to help stimulate the economy. These types of purchases played a role in keeping mortgages rate down.
The Lowdown On How To Secure The Lowest Refinance Rate
When you decide to you’re ready to seek out a lower mortgage rate and, hopefully, start the refi process, keep in mind that lenders may not automatically offer you the lowest rate; securing a better rate could require a bit of effort on your part.
As a borrower, there are certain steps you can take that could put you in the best position to refinance and save yourself thousands of dollars. First, look into mortgage rates from at least five lenders as a means of gathering information about the best loan available for a borrower with your credit profile. Second, check your credit score, which you can do quickly and easily – and for free – online. Individuals with the highest credit scores are usually able to secure the lowest interest rates.
If you think a refi isn’t possible at this time, consider other ways to save money on homeowners costs. A good place to start: Check into the annual cost of your homeowners insurance. You can secure quotes from multiple insurers to determine if you can secure the same amount of coverage for a less expensive premium.