Low Rates Give Homeowners One Last Chance to Refinance

After the Federal Reserve announced it would start tapering its mortgage stimulus program beginning this year, most analysts believed that meant long-term interest rates would start rising, signally the end of attractive refinancing options. Yet according to Freddie Mac’s latest U.S. Economic and Housing Market Outlook, less-than-stellar job market performance has dampened the mood of investors, helping to keep interest rates low and granting homeowners another chance to refinance into less expensive loans.

“It appears mortgage rates may have given the market a reprieve for a month or so and provided some borrowers another chance at refinancing, especially those folks that may be holding older mortgages,” said Freddie Mac vice president and chief economist Frank Nothaft in a statement. “However, if rates continue their upward trend, it will be difficult for many families to purchase a home without seeing some income growth.”

Long-term mortgage interest rates fell every week in January as investors dumped money into U.S. Treasury bonds, worried by the addition of only 113,000 jobs that month. Rates have only ticked up just slightly since then, providing homeowners who refinanced even four or five years ago an opportunity for savings. In fact, Freddie Mac estimates that there is $800 billion worth of mortgages out there currently that could benefit from today’s lower rates.

Still that window may be closing soon, as rates are expected to rise steadily, if slowly, over the course of 2014.

Then again, if the jobs market can’t pick up enough steam soon, rates just might stay low for another month or so. “Rising home prices and interest rates along with little to no income growth has resulted in a substantial erosion of homebuyer affordability over the past year,” Nothaft advised. “Therefore, jobs and income growth are necessary for 2014 to turn in another gold-medal performance for the housing recovery.”




Ads By Google

Trackback URI | Comments RSS

Leave a Reply