Mortgage rates may go up, but now is still a good time to get a refinance. Here’s what you need to know before you start refinancing. (iStock)
At the beginning of the pandemic, mortgage rates fell to historic lows. However, amid the rollout of the coronavirus vaccine and the reopening of businesses, those record-low interest rates are set to rise again.
In fact, for much of 2021 so far, there has been a rising trend in mortgage rates so many home buyers are wondering if it is still possible to get a good rate on a home loan. Fortunately, the mortgage market – even for first-time buyers – is still in great shape compared to pre-pandemic times, which means mortgage refinancing is still viable options to save money on monthly payments.
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Here’s what you need to know about how current mortgage rates in the housing market are likely to change before starting the refinancing process. When you’re ready to explore your loan options, visit Credible to compare interest rates and lenders in minutes.
What factors affect mortgage rates?
In discussing the various factors that affect current mortgage rates, there is none more important than the 10 year Treasury rate of return. Put simply, government bonds are often considered safe investments because they are backed by the US government.
As such, they are considered a yardstick for investor sentiment. When the demand is high it is a sign that the economy is changing and investors are looking for a safe place to invest. When demand increases, returns decrease because the government pays less for the bonds sold.
Typically, the interest rate on government bonds is very closely tied to mortgage rates and can be used as an indicator of how interest rates will change in the future and, more broadly, when is a good time to refinance.
Other economic factors that can affect the Federal Reserve’s setting of interest rates include the unemployment rate, inflation rate, and current home conditions. All of these factors taken together make it easy to see why rate hikes were observed as the economy began to recover.
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If you think now is the right time to refinance, use an online mortgage savings calculator to see how much you can save on your mortgage payment.
What will the mortgage rates be for the rest of 2021?
Now that you know more about how mortgage rates are projected, it is time to take a closer look at how they will change in 2021. As the economy continues to recover and stabilize, it is likely that they will rise in the short term. In the longer term, however, the Federal Reserve has announced that it will keep interest rates low until at least 2023.
“I tell buyers not to panic. They shouldn’t be deterred by an increase in prices [from refinancing] now, says Beatrice De Jong, consumer trends expert at Opendoor. “In recent years, homebuyers have benefited from unusually low interest rates. But interest rates were average up to 6% in the late 1990s, and it’s important to remember that in the 90s, people were still buying houses and benefiting from rising home values. “
But despite the wise words of many experts, the rise in interest rates has led to a collapse in refinancing applications. According to the latest weekly survey by the Mortgage Bankers Association (MBA), the refinancing index is down 1% last week and is 18% lower than the same week last year.
When you’re ready to refinance your mortgage, visit Credible to compare loan rates and lenders.
What you can do to get a great deal
In the course of the economic recovery, rising mortgage rates are to be expected. However, this does not mean that you cannot get adequate refinancing rates. In this case, it is important to focus on personal financing methods to make sure you can access a good interest rate.
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Improving bad credit and building credit can help you get a lower interest rate, as those with higher credit scores often get the best rates over those with lower scores. On the other hand, opting for a 15 year mortgage versus a 30 year mortgage can also be beneficial as mortgage lenders are often willing to give you a lower interest rate in order to get an earlier repayment.
An online mortgage broker like Credible can help you get personalized pre-approval letters and interest rates without compromising your creditworthiness.
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