Mortgage rates start the year up but stay historically low – for now

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Mortgage rates start the year up but stay historically low – for now

Average mortgage rates edged up at the end of 2021, with further increases expected to welcome borrowers in the new year, according to a popular poll.

The COVID-19 pandemic, which is in its third year, continues to wreak havoc on the economy, with the omicron variant now tearing the country apart. While the economic fallout could normally lead to lower borrowing costs, mortgage rates should continue to move north.

Homeowners who procrastinate and have made New Year’s resolutions to finally turn to refinancing will want to do it before historically low mortgage rates today are history.

30-year fixed mortgage rates

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The interest rate on a 30-year fixed-rate mortgage rose an average of 3.11% last week, down from 3.05% a week earlier, according to the mortgage giant Freddie Mac reports.

A year ago, 30-year fixed rate mortgages averaged just 2.67%, on their way to a record low in early 2021. Rates have remained relatively low for most of the month. last year, but then started to climb in the fall and stayed a bit above. 3% since mid-November.

Mortgage rates have indeed moved sideways despite the increase in new cases of COVID. Indeed, incoming economic data suggests that the economy remains on solid footing, especially cyclical industries like manufacturing and housing, ”says Sam Khater, chief economist at Freddie Mac.

“While we would expect rates to rise, the first-time homebuyer demographics that propel the buying market forward will continue into 2022 and beyond.”

15-year fixed rate mortgages

The average interest rate on a 15-year fixed-rate mortgage climbed to 2.33% last week, from 2.30% the week before, according to Freddie Mac. Around the same time a year ago, the 15-year loan average was 2.17%.

Shorter term home loans are popular with homeowners refinancing 30-year mortgages. With a 15-year loan, borrowers will pay much less interest over the life of their loan, but their monthly payments will likely be higher.

Industry insiders seem to agree on the direction of rates.

Freddie Mac’s forecast is for 30-year mortgage rates to average 3.7% by the end of 2022, but the Mortgage Bankers Association – the largest trading group in the nation’s mortgage industry – predicts that rates will reach 4%, with further increases likely in 2023.

5-year adjustable rate mortgages

Five-year variable rate mortgage rates – or ARMs – ended the year on average at 2.41%, down from 2.37% a week earlier, according to Freddie Mac. The rates are much lower than a year ago, when the typical five-year MRA was at a much higher rate of 2.71%.

Interest rates on adjustable rate home loans may rise or fall after a period of time, depending on the performance of a particular benchmark such as the prime rate.

When rates rise, many borrowers refinance their ARMs into more stable fixed rate loans.

Why rates will go up

The concept of growth of the real estate market.  The increase in housing prices.  Rising prices for utilities.  Increased interest on mortgages and increased interest rates on mortgages.  Rent increase.

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Mortgage rates generally follow the yield – or interest – paid on government bonds.

Last week, the yield on 10-year Treasuries surpassed 1.5% for the second time in December, notes Danielle Hale, chief economist at Realtor.com.

“Investors have responded with growing optimism following the initial cautiousness in response to the emergence of the omicron variant, even as the number of cases increases,” Hale said. “If higher rates on long-term treasury bills can be sustained, which will likely require news stability around omicron and COVID, this will translate into higher mortgage rates for homebuyers.”

The Federal Reserve’s monetary policy changes are also expected to push rates up. November’s 6.8% inflation rate – which was the highest in nearly 40 years – prompted the Fed to speed up the liquidation of its pandemic policies that kept rates low.

“Inflation is here to stay for much of 2022 and potentially a bit beyond, so it’s fair to say that mortgage rates will move a bit higher in the future. [2022]San Francisco-based mortgage banker Arjun Dhingra said in the latest episode of The Mortgage Reports. Podcast.

How to get the lowest possible mortgage rate

Payday.  Attentive and focused millennial spouses sitting on the couch at home discussing the possibility of taking out a refinance mortgage.

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If you look around you can easily find a 30 year refi mortgage under 3%, or 15-year loans with rates around 2%. But these low rates may soon be a thing of the past.

Whether you’re a home buyer or a homeowner considering an economical refinance of an existing mortgage, it might be time to lock in a low rate.

Borrowers who refinanced into 30-year loans in the first half of 2021 saved over $ 2,800 in mortgage payments per year, Freddie Mac Research found.

Whatever type of loan you are looking for, compare the offers of at least five different lenders to get the lowest rate for your area and for someone with your credit profile.

Before submitting your loan application, obtain a free overview of your credit score. Borrowers with the highest credit scores are usually offered the lowest rates, so you may need to work to improve your score before you start approaching lenders.

If piles of high interest debt are preventing you from finding an affordable mortgage rate, you may want to consolidate those balances into one low interest debt consolidation loan. You will pay less interest, eliminate your debt sooner and perhaps free up much-needed cash.

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


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