Mortgage rates have been low – historically low at times – for much of the past four years. Many people took advantage of this and refinanced their mortgage or purchased a new home and locked in a rate that was unfathomable no more than a few years prior. More recently, mortgage rates have increased. According to Bill Banfield, vice president of Capital Markets at Quicken Loans, the recent uptick in mortgage rates shouldn’t signal a huge cause for concern.
“The recent increase in rates that was triggered from the election results has not only been put on pause, but we’ve recovered more than half of the change,” Banfield said. “The reaction was a result of the market believing fiscal stimulus would cause economic growth and spur inflation. Because inflation is a huge factor in the level of rates, an increase perception of inflation growth had an immediate impact.”
Historically speaking, even with mortgage rates rising, they’re still well below what we’ve seen in the past. According to CNN, the average 30-year fixed-rate mortgage rate in 1996 was 5.67%. In 1990, it was 10.13%. As of this writing, the same 30-year fixed-rate mortgage rate is 4.125%. In other words, mortgage rates are still extremely low, relatively speaking.
While consumers may think of rising rates as a negative, Banfield said that’s not always the case.
“For consumers, it’s important to remember that nothing happens in a vacuum,” Banfield said. “Higher rates coming from inflation expectations can be translated to say that we expect growth to pick up, wages to increase and, with a shortage of housing that isn’t likely to change, continued increases in home prices.”
Even with mortgage rates reaching historic lows beginning in 2012, there are still many homeowners who didn’t take advantage by refinancing their mortgage. However, despite the higher rates we’ve seen recently, many homeowners are still refinancing. In fact, 55% of mortgage applications in late November were from refinancers, according to the Mortgage Bankers Association in an article posted on Bankrate.
If there’s one thing we know about mortgage rates, it’s that we can never be 100% certain how they’re going to react to certain events or what way they’re going to trend and for how long. What we can do is take advantage of them when they are low.
We knew that mortgage rates wouldn’t stay historically low forever, which begs the question: Did you take advantage and refinance to lock into a lower rate? If not, now is the perfect time to act. If you’re looking to purchase a home, the same is true.
With mortgage rates trending upward, every increase adds to your total overall cost. For example, in an article published by Consumer Reports with information provided by Bankrate, a $200,000 mortgage with a 30-year fixed rate of 3.64% would set your monthly mortgage bill at $914 per month, for a total 30-year cost of $328,965. The same $200,000 mortgage with a 30-year fixed rate of 4.18% would cost $976 per month, for a total 30-year cost of $351,252. That’s a difference of $22,287. Who wants to throw away that kind of money in interest just because they didn’t take advantage of a lower rate?
Our goal is to get you into the best possible mortgage situation for you. As you can see, mortgage rates can change from one day to another. If you’re ready to get started, we’re ready to help.
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