Ever since the Federal Reserve slashed short term rated and pushed money into the mortgage market, interest rates have begun to stabilize at extraordinary low numbers. These low interest rates are making it a fantastic time to refinance your current mortgage to potentially save you more money.
Back in March 2020, precautions were taken by the Federal Reserve to make sure money kept flowing into the mortgage market. This included rate cuts, which helped make up the wider efforts to stabilize the economy from the effects of the Coronavirus pandemic.
Since billions of dollars worth of mortgage backed securities were pledged to be bought by the Fed, interest on fixed-rate mortgages and HELOC loans have drastically decreased. However, there are now fewer homes being put on the market, and overall applications and home sales are very much down.
This can be attributed to mortgage forbearance and the government making an effort to prevent homeowners from losing their homes due to foreclosure. However, this does limit the lumber of foreclosed homes entering the market.
So, what does all of this mean for those looking to refinance?
Why were rates cut by the Fed?
The mortgage industry was already seeing rates decrease weeks before the Fed’s initial rate cut back in March. And 12 days later, a second emergency rate cut was announced. This reduction in interest rates were intended to help stimulate the economy while people were out of work and dealing with difficult financial situations. After a Meeting in late April 2020, the Fed announced that it intended to keep interest rates near zero until it is confident that the economy is in a strong position to recover.
How mortgage interest rates were affected:
In March, the Fed also announced its intention to purchase billions of dollars worth of mortgage-back securities to help stabilize the mortgage market. Designed to keep money flowing this process is known as quantitative easing.
Quantitative easing helps ensure that lenders will have money for buyers and refinancers to actually borrow. Mortgage rates continued to fall and the Fed stated that they intended to continue its tactic of quantitative easing.
Tips for those who are refinancing:
Many homeowners are choosing to refinance their current mortgage, and with good reason too. Mortgage rates have recently hit all time lows. Though the influx of refinances has caused delays, you can help speed up the process by submitting a full application.
It’s important to understand how you will benefit from a refinance. This will ensure that your loan officer will help you get the best loan for your specific situation. Refinances can have a number of benefits for homeowners including replacing an adjustable rate mortgage with a fixed rate mortgage, shortening the duration of a loan, or lowering a monthly payment.
Be sure to shop around too. Different lenders make different offers. It’s recommended that you get loan estimates from at least three different lenders before making a decision.
Be sure to trust your loan officer’s advice when it comes to rate locks. With the current state of the mortgage industry, not all lenders are offering rate locks. Some are offering rate locks much later in the home loan process than they would under normal circumstances.