Today, mortgage rates are down more than 1% since late last year. If you were looking for a $300K mortgage in late 2018, you would be paying $240 more per month than you would now based upon Freddie Mac data. With current rates at 3.875% for a 30-year fixed mortgage and 3.375-3.5% for a 15-year fixed, September is looking like an optimum time to make a move if you are thinking about a home purchase, refinance or home equity line of credit. Most forecasters for 2019 are projecting rates in the 4.4% range by the end of the year. That’s down from forecasts earlier in the year that called for rates in the 5s but not as low as current rates.
Many factors are at play which are influencing the lower rate environment:
*Trade Wars: The world’s two largest economies, US and China, are engaged in a trade war which is causing volatility in the markets. Trade wars often lead to slower economies on both sides which typically means lower rates.
Fed Rate Cut: The Fed cut its rate by a quarter-point this week, as expected. It should be noted that this was the central bank’s second such cut after lowering rates in July for the first time since July, 2008. While the Fed doesn’t control mortgage rates directly, its actions influence rates of all kinds including mortgage rates.
Yield Curve Inversion: The 2-year/10-year yield curve inverted in mid-August. This unusual occurrence has accurately predicted the last seven recessions. Even if a recession doesn’t follow and the Fed does not believe that a recession is on the horizon, markets don’t like uncertainty and are worried.
With lower rates, buyers flood the market which causes home prices to rise which is another reason to jump in the market now if you are thinking of making a home purchase or refinance an existing mortgage. To decide if refinancing is the best option for you, start by considering the following:
Why Do You Want to Refinance? The most common reason is to lower your interest rate and payment. If you have a 5% interest rate or higher, it would be worth exploring if you can take advantage of the current lower interest rates less than 4% to reduce your month payment and overall cost of the loan,
Shorten the Term of Your Loan: If you have a 30-year loan, it may be advantageous to change it to a 15 or 20- year loan to pay off your mortgage sooner.
Cash-out Refinance: With home prices increasing, you might have enough equity to cash out and use the money for other means such as a vacation home, college tuition, renovations, etc.
It should be noted that there are fees and closing costs involved in refinancing. If you were to refinance an existing loan into a new loan, total closing costs will run between 2%-4% of the loan amount. It should also be noted that lenders are not properly staffed to deal with the unexpected lower rates. After 2018’s escalating rates, lenders cut back on staffing as refinancing was not a desired option. If you are planning on refinancing, do it now or be prepared to wait as lenders will be challenged to handle the volume of refinancing requests.
Should you have any questions on the above or are thinking about buying or selling residential real estate in South Florida and not currently working with a Realtor, please don’t hesitate to contact me at (954) 547-9483 or via email at jkenney10f@gmail. com. Thanks