Yes – mortgage rates ticked up higher this week after a free fall over the past two months.
That’s not the trend I’m talking about though.
Have you seen the nationwide averages for 15-year fixed mortgage rates lately?
They’re hanging below the 3.00% line like Kevin Durant hangs out at the beach volleyball pits.
The first time they averaged below 3.00%, we all stood there in amazement. Now, ever since May 31, 2012, 15-year fixed mortgage rates haven’t sniffed 3.00% and it doesn’t look like they’ll jump back up any time soon.
My main man Frank Nothaft says you can thank the Federal Reserve for 15-year fixed-rate mortgages being so low.
He explained, “They have pushed short-term interests rates as close to zero as they can, and that keeps other short-term lending rates fairly low.”
Plus, take it one step further and look at the difference in average rates from now compared to a few years back.
In July 2007, the average 30-year fixed-rate mortgage was 6.70%, whereas the 15-year fixed-rate mortgage average was 6.39% for a difference of 0.31%.
In July 2012, the average 30-year fixed-rate mortgage was 3.55%, while the 15-year fixed-rate mortgage average was 2.85% for a difference of 0.70%.
That’s a major increase in spread differential in a really short period of time.
According to Freddie Mac statistics, 31% of those who refinanced during the first quarter paid off a 30-year fixed-rate mortgage and swapped it for a shorter-term loan, which makes sense for a variety of reasons. Homeowners want to pay off their mortgages before they retire or want to get rid of debt quickly.
Does this mean a 15-year fixed-rate mortgage is right for you?
Maybe. It all depends.
If you plan on staying in your home for a long time, maybe a 15-year fixed mortgage isn’t for you. Also, if you are cash-strapped and will be pulling strings just to meet your mortgage payments, maybe you should go for a longer-term mortgage, like a 30-year fixed.
Just do your homework before you decide that a 15-year fixed is right for you. Every potential homebuyer or refinance seeker has a different situation and you want to make sure you’re looking out for number one here and not follow the crowd just to follow the crowd. Contact one of our Home Loan Experts to see which type of home loan makes sense for you.
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