Since the start of the pandemic, mortgage and refinance rates steadily decreased, reaching a historical low of 2.65% for a fixed-rate 30-year mortgage in January 2021. However, over the past few months, we've seen an increase in mortgage rates.
Rising mortgage rates are due to a number of factors. As rates slowly but consistently climb, potential homebuyers and those looking to refinance may still want to consider making a move and catching the tail-end of this season of lower rates.
While the decision to purchase a home or refinance should be well-thought-out, with the housing market there’s always the risk of waiting too long and missing out on a good interest rate. You can compare mortgage rates across multiple lenders without affecting your credit score on an online loan marketplace like Credible.
Why are mortgage rates increasing?
Mortgage rates can rise or fall due to a number of reasons. The strength of the economy is one of the biggest factors. Unemployment numbers have dwindled since their peak during the pandemic, and with more people receiving another stimulus check along with their dose of the COVID-19 vaccine, economic recovery is in full swing and the outlook is positive.
Also, there is always concern for inflation. The Federal Reserve’s major rate cut in 2020 was intended to make it easier for people to borrow at lower rates. However, the Federal Reserve decisions affect mortgage rates by governing how much banks pay to borrow funds, which could in turn affect how much mortgage lenders charge borrowers.
High inflation causes an increase in mortgage rates, as well as home prices. Even though the Federal Reserve plans to keep rates low near 0%, they can only influence the housing industry by directing the flow of money into the economy at large. When inflation increases too strongly, this causes the Federal Reserve to tighten the money flow and increase costs for banks to lend money, leading to rising mortgage rates.
Will mortgage rates go up for the rest of 2021?
Unfortunately, mortgage interest rates are higher than they were at the end of last year. Kevin Leibowitz, a mortgage broker in Brooklyn and founder of Grayton Mortgage, predicts that we might have some stabilization and a slight decrease in rates versus the one-sided uptick that we’ve been seeing for the past four to six weeks.
"Based on the current news and economic cycle, we still might be looking at lower mortgage and refinance rates for the near future," Leibowitz said. "The Federal Reserve sets the tone of the market by changing the rates that they administer."
"But, after setting the tone, the market does what it does," Leibowitz added. "The main driver at that point is the treasuries purchase of mortgage-backed securities. This is the actual instrument that mortgages — from Fannie Mae and Freddie Mac, which represent 80% of the housing market — get pooled into. As long as the Treasury continues on their asset purchase program, mortgage rates should remain at the relatively low level that they’re at now."
If you want to take advantage of lower rates now, visit Credible to view loan offers across multiple lenders without affecting your credit score.
Is now a good time to refinance your mortgage?
For the past 12 months, mortgage refinance rates have remained low. At one point in December 2020, rates were at a record low of 2.625% for a 30-year mortgage refinance and 2.125% for a 15-year fixed-rate loan. As of May 6, 2021, mortgage refinance rates were:
- 2.875% for a 30-year fixed-rate refinance
- 2.250% for a 15-year fixed-rate refinance
While there has been an increase, the interesting thing is that rates are holding firm for now. This means if you’re like most people looking to refinance for a lower mortgage rate and monthly payment, now may be the time to act in case current mortgage rates get even higher over time.
Of course, refinancing always depends on your personal situation, credit and income, among other factors. That said, it doesn’t hurt to shop around and get a good idea of what your loan terms could be like. To see how much a refinance could save you and estimate your monthly mortgage payment, check out Credible’s mortgage calculator.
Can you negotiate mortgage rates?
Many things in life are negotiable to some degree, and this includes mortgage interest rates. You can start by shopping around and comparing terms from different mortgage lenders. If you settle for the first mortgage rate you qualify with for one lender, you won’t know if you’re missing out on a better rate with someone else. Even a slightly lower interest rate could lower your monthly payments and save you thousands on your mortgage over time.
Another way to negotiate your mortgage rate is with discount points, as you have the option to buy discount points with most lenders. These "points" allow you to pay a little more upfront for a lower mortgage payment over the life of your loan. Typically, a point costs 1% of your total loan amount and can lower your rate by 0.25%. So if you have a mortgage interest rate of 3.5% and pay for one discount point, this means your rate could be lowered to 3.25%.
Overall, an excellent credit score can help you negotiate the lowest mortgage rate possible, so be sure to maintain good credit by paying your credit card statements and other bills on time.
Get started by checking rates and gathering information
If you’re in the market to buy a home or refinance, odds are you want to play it smart and lock in the best interest rate and loan terms. The best way to start the process is by checking current mortgage interest rates across multiple mortgage lenders so you can make your decision with confidence.
Visit Credible to get in touch with an experienced loan officer and get all your mortgage questions answered.
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