Remember last year when I said rates could either go up, go down or stay the same?
Well, I was right. 😊
OK – I was actually right about the rates going up part.
And I was just repeating what Barry Habib was saying.
Habib thought rates would go up early this year and then come down later this year once COVID concerns abated and supply chains opened up (lowering costs and therefore prices).
Over the last week alone rates have gone up about 1/4% and are now at levels we have not seen since early last summer.
Rates seem to be spiking more quickly than expected b/c Habib may have missed a few other factors that are putting upward pressure on rates.
These factors include President Biden’s large $1.9 trillion stimulus package and economic exuberance in general, as consumers and businesses alike seem very eager to plunge back into “normal life.”
Retail sales numbers are already much higher than expected, and inflation signals are surfacing as well.
All this excitement translates into higher rates, as investors are worried about both inflation and higher rates in general in response to a stronger than expected economy.
WHAT SHOULD BORROWERS DO? (Hint: Refi now)
This probably sounds self-serving, but borrowers should refinance now before it is too late . . . even if they don’t use JVM (God forbid 😊).
This is particularly the case if they can lower their rate by 1/4% or more and the refi is “no cost” (meaning the lender pays all of the nonrecurring closing costs).
If rates fall again, as Habib predicted, then borrowers can just refinance at “no cost” again.
But if inflation continues to loom large (as many market-watchers predict) and the economy heats up, rates will continue to climb and everyone who refinances now will be delighted that they did.
RATES ARE STILL LOW
Even though rates have climbed 1/4%, they are still insanely low, and over 1/2% lower than where they were last year at this time.
So, millions of borrowers can still lower their rates at no cost.
HOW THIS AFFECTS BUYERS? (Hint: Minimally)
A 1/4% increase only pushes mortgage payments up by a little under $14 per hundred thousand borrowed.
A $500,000 loan will see a $67 higher payment.
NEWS IS ONE WEEK BEHIND
I just went on Freddie Mac’s mortgage rate survey site and they are reporting rates from 2/11/21 – when they were about 1/4% lower.
Unfortunately, this is a primary source for many news reporting agencies so many borrowers will be reading about continued low rates despite the recent increases.
Hence, this is another reminder that news reports often lag the actual market by as much as a week.
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