Borrowing costs

Mortgage rates stagnate, but higher borrowing costs are not far away

Mortgage rates stagnate, but higher borrowing costs are not far away

Mortgage rates are taking a break, after showing little upward or downward movement in recent weeks, according to a widely followed survey.

This gives homebuyers and refinancing owners more time to lock in money-saving rates before they evaporate.

There is good reason to believe that rates will start to rise again. The latest: Inflation just hit a nearly 40-year high, and several reports predict that today’s historically low rates should head north in the coming weeks.

30-year fixed mortgage rates

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The interest rate on a 30-year fixed-rate mortgage was on average 3.10% last week, down from 3.11% the week before, mortgage giant Freddie Mac reports.

A year ago, the survey looked at 30-year fixed rate mortgages averaging 2.71%.

For now, fears about the omicron variant have kept rates from skyrocketing. But inflation – which climbed 6.8% in November, the fastest pace since 1982 – along with the Federal Reserve’s pullback on recent bond-buying policies that have kept borrowing costs down. low, average rates are expected to rise.

“This rapid inflation is the reason why higher mortgage rates are expected in 2022,” said Lawrence Yun, chief economist of the National Association of Realtors.

Fed will need to raise interest rates to contain rising prices on a multitude of consumer goods, Yun said. Multiple forecasts put the average 30-year fixed-rate mortgage at nearly 4% by the end of next year.

15-year fixed mortgage rates

The average interest rate on a 15-year fixed-rate mortgage was 2.38% last week, down a bit from 2.39%, according to Freddie Mac.

At the same time last year, 15-year loans averaged 2.26%.

The 15-year fixed rate is popular for refinancing because the shorter term means much less total interest. The monthly payments are higher than with a 30-year mortgage, however, so 15-year loans are not for everyone.

Keep in mind that Freddie’s rate numbers are averages. Some lenders offer rates below 15 and 30 years, below 3%, and even below 2%.

5-year adjustable mortgage rates

Five-year variable-rate mortgage rates averaged 2.45% last week, up from 2.49% the week before. Around the same time a year ago, loans were on average much higher at 2.79%.

ARMs have rates that can change after a set period of time at the start of the loan. If you have an ARM 5/1, for example, you’ll get five years of fixed interest. Then your rate may adjust – up or down – every (one) year thereafter.

Refinancing to a fixed rate loan eliminates the risk of ending up with higher monthly payments when rates rise.

The “window of opportunity” will narrow

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Millions of homeowners still have the opportunity to reduce their housing costs by refinancing. And some of them got the message, based on new data from the Mortgage Bankers Association.

The most recent week’s refi requests were up 9% from the previous week, according to the trade group.

“Borrowers continue to seize these opportunities, but if rates tend to rise as MBA predicts, the refinancing window of opportunity will continue to narrow,” said Joel Kan, group forecaster.

Assuming omicron doesn’t become a serious problem, rates could easily climb in the coming weeks, says Peter Warden, editor of The Mortgage Reports.

“As long as investors have reason to be bullish about omicron, mortgage rates are expected to rise slowly,” he writes.

Find the best rate on a refi

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In the first half of this year, the owners jumped on the refi bandwagon. Those who were able to refinance 30-year fixed-rate home loans into new ones saved more than $ 2,800 in mortgage payments per year, according to a study by Freddie Mac.

To lock in the lowest interest rate available, you will need to do some homework.

The best rates are usually reserved for borrowers with the strongest credit. Checking your credit score for free is easy today.

If you want to go ahead with mortgage refinancing, be sure to compare loan offers from several lenders to find the lowest rate for your area and for someone with your credit profile. Studies by Freddie Mac and others have found that the comparison five rate quotes seem to be the magic number for getting the best deal on a mortgage loan.

If a refi isn’t possible or you want to do something about it, there are other ways to lower the costs of home ownership. When it’s time to renew your home insurance, always get quotes from multiple insurers, to make sure you’re not overpaying.

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