It’s been over two months and a half since mortgage rates last went up more than 2%, but we may be kissing goodbye to that era, as mortgage rates inched above 3%.
The Economy Is in the Reovery Phase
Although inflation remains elevated, the economy is gradually recovering from the negative situation the pandemic inflicted. This factor has contributed to the increase in mortgage rates, according to Freddie Mac’s Chief Economist, Sam Khater. Sam says he expects mortgage rates to continue to rise in the second half of the year, judging by the pace of the economy’s recovery. According to the National Association of Realtors®, they expect mortgage rates to average 3.2% by the end of 2021.
According to national averages report by Freddie Mac, 30-year fixed-rate mortgages averaged 3.02% with an average of 0.7 points. This is an increase from the 2.93% average recorded last week. In the same period the previous year, a 30-year rate averaged 3.13%.
15-year fixed-rate mortgages went up 0.1% from 2.24% a week ago to the new national average of 2.34%. However, the mortgage rate averaged 2.59% in the same period last year.
At this time last week, 5-year hybrid ARMs (Adjustable-Rate Mortgage) averaged 2.52%. However, this week’s report shows that the new average is 2.53%, up by an average of 0.3 points. In 2020, it averaged 3.08%.
But what does this good news mean for homeowners and lenders?
The Impact of the New Mortgage Rate on Home Refinancing
Rising rates are signs of a more robust economy. With a stronger economy, consumers and investors feel confident in pulling out cash from their savings and investing.
At 3%, the economy isn’t close to being the strongest, but considering that the whole world is coming out of a disastrous year, 3% is more than enough. It’s a pretty positive step that the economy is improving.
Homeowners who are looking to get their homes refinanced can take advantage of this opportunity to save up on their currrent rate. Although the mortgage rate rose, it’s still somewhat low, which is good news for homeowners. With this, homeowners can risk asking mortgage lenders to refinance their homes to make lower monthly mortgage payments against the current monthly mortgage being paid.
But the decision to opt for home refinancing should depend on your current mortgage plan, if your home has enough equity, and if you want to pay off your loan faster in a shorter time or not.
However, homeowners should expect competition from buyers if they want to opt for home refinancing, but they should be worried about higher closing costs. Buyers’ competition and strong demand can drive mortgage rates higher.
As for lenders, they can still recoup some of their lost money lent to borrowers during the low rate period, now that the rate is above 3%.
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Published by Eric Lawrence Frazier, MBA.
