12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
As Mortgage Rates Move Higher, There's Still Time for Refinancing
By Richard BarringtonNFNS Columnist
After a sustained
decline over the second half of 2007 and the early days of 2008, mortgage rates
have moved a little higher in recent weeks. The steep fall in rates sparked a
flurry of refinancing activity, so it is natural for anyone who hasn't yet
acted to wonder if there is still time for refinancing. The answer for many mortgage
holders is yes, but it would be wise not to hesitate. The reason for this
answer is that mortgage rates are still relatively low, but are once again
proving how changeable they can be.
The Fall and Rise of Mortgage
Rates
In July of last year, thirty-year mortgage rates were at
around 6.70%. From there, they began a very significant downward march. Mortgage
rates declined in five of the next six months. They bottomed out at 5.48% in
January of 2008, making for a total decline of well over a full percentage
point. Not surprisingly, refinancing activity reached a fever pitch.
That low of 5.48% was reached on January 24th. After
that, mortgage rates reversed direction, rising in three of the next four weeks.
By February 21st, they were back over 6%, at 6.04%.
What's Next?
With such dramatic changes, the natural question is: what's
next? Is this the start of a march toward 7%, or will rates subside again and
spark better opportunities for mortgage refinancing?
Mortgage holders pondering this question should be advised that near-term interest rate changes are notoriously hard to forecast. However, they should take note of two things:
- At 6.04%, mortgage rates are still much closer to the low end of their historical range than the high end
- Inflation,
which puts upward pressure on interest rates, has shown signs of perking
up lately
In other words, betting on a significant drop down in mortgage
rates would seem to be a bet against the odds.
Refinancing Still
Looks Good For Many Mortgage Holders
The good news is that even at recent levels, the refinancing
party isn't over for many mortgage holders. Refinancing makes sense when
current interest rates are below the rates on the existing mortgage; how much
lower they need to be depends on closing costs and other factors. Overall
though, mortgage rates are still lower than they were for most of the months
when existing mortgages could have been originated.
By definition, an existing thirty-year mortgage could have
been originated any time in the last thirty years -- that's 360 possible months.
Thirty-year mortgage rates were higher than 6.04% in only 28 of those 360
months -- less than 10% of the total. This suggests that there are still many mortgages
out there that were originated at higher rates. For those mortgage holders, it
is still well worth looking into refinancing.
While the party may not be over, homeowners shouldn't wait
too long to join it. If there is one sure thing about mortgage rates, it's that
they don't stay in one place for long.
Source:
Freddie
Mac
About the Author:
Richard Barrington is
a freelance writer and novelist who previously spent over twenty years as an
investment industry executive.
About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.