The prevailing sentiment is that the Federal Reserve could start raising its benchmark borrowing cost by summer, but rates are still in historically low territory with the 30-year fixed mortgage slipping this week to 3.78 percent.
In December 2008, the Fed lowered its federal funds rate to its lowest “near zero” point, and it hasn’t moved since. It’s been even longer since the Fed actually raised rates. It was in June 2006.
As home prices continue to rise, more homeowners should be giving serous consideration to refinancing before mortgage rates push back over 4 percent and higher.
Of course, such a move would have to make sense, depending on the existing mortgage’s current rate and whether it is fixed or variable. With higher rates looming, it may be best for some homeowners to move into a fixed home loan at this time.
When weighing whether to refinance, many borrowers rely on the rule of thumb — a reduction of 1 percentage point makes refinancing worthwhile. But there are other considerations, including closings costs and the length of time a homeowner expects to stay in the home.
Experts generally say that estimating how long you’re going to keep the property is important. Then you can figure out what the principal balance will be when you’re ready to sell — and compare that with the expected balance if you don’t refinance.
Mortgage rates are linked to Treasury yields, which will climb should bond yields start to rise in the wake of the Fed’s expected rate hike.
To put the current 30-year mortgage rate in perspective, here is some sobering history: the 30-year rate was at about 5.9 percent a decade ago and 7.9 percent in 1995.
Dave Roda, regional chief investment officer for Wells Fargo Private Bank, told the Associated Press that consumers should lock in borrowing costs now while rates are low if its financially feasible. “We probably won’t see rates this low again, maybe in our lifetimes,” he said.
Meanwhile, Freddie Mac said Thursday that rates were lower in response, in part, to mixed housing data released over the last few days. Housing starts dropped 17 percent to a seasonally adjusted pace of 897,000 units, below market expectations. However, housing permits increased 3 percent in February.
“As we head into spring, home builders remain positive about home sales in the near future although the NAHB Housing Market Index dropped another 2 points to 53 in March,” said Len Kiefer, deputy chief economist, Freddie Mac.
Here is Freddie Mac’s latest overview of mortgage rates:
30-year fixed-rate mortgage (FRM) averaged 3.78 percent, with an average 0.6 point for the week ending March 19, 2015, down from last week when it averaged 3.86 percent. A year ago at this time, the 30-year FRM averaged 4.32 percent.
15-year FRM this week averaged 3.06 percent, with an average 0.6 point, down from last week when it averaged 3.10 percent. A year ago at this time, the 15-year FRM averaged 3.32 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.97 percent this week, with an average 0.5 point, down from last week when it averaged 3.01 percent. A year ago, the 5-year ARM averaged 3.02 percent.
1-year Treasury-indexed ARM averaged 2.46 percent this week, with an average 0.4 point, unchanged from last week. At this time last year, the 1-year ARM averaged 2.49 percent.