Most home buyers take out a mortgage in order to buy a home. Mortgages make it easier to buy the home they want without the need for a huge down payment. However, a mortgage can be very expensive. Over time, the homeowner will have to pay huge costs to borrow the money. Under these circumstances, it is not surprising that so many homeowners seek to find the lowest possible mortgage rates.
It is also not surprising that many homeowners have taken the time to lower their mortgage interest rates whenever possible. In recent years, many homeowners have chosen to refinance their mortgages as interest rates have dropped and they can pay less.
COVID Driven Demand
The rise of COVID-19 led many people to think about their finances in a different way. Part of this process meant a closer examination of their bills as well as finding ways to reduce their housing costs. As a result, the markets saw a brief surge in the number of homeowners choosing to refinance their existing mortgage. However, there are signs this process may be at an end.
Home refinancing applications have decreased by a full six percent in the last week alone. Officials who watch the markets closely are also reporting such applications are actually down by over forty percent. The latest COVID variant is known as the omicron. When it was first announced to the public, mortgage rates actually feel for four days in a row. As a result, there was an immediate rush by many homeowners to take advantage of this process and reduce their mortgage rates.
However, the brief fall was immediately followed by an increase in such rates. The sharp swing in interest rates has left many homeowners unsure of their next steps and trying to figure out if they should choose to refinance right now or consider another time.
Weekly Average Mortgage Rates
While there have been relatively large swings in mortgage rates this week, it is also true that such rates have remained relatively unchanged. Homeowners can expect to pay an average of 3.30% on a fixed thirty year mortgage. Points have also remained unchanged. They are still at .39. This includes all the original fees for all homeowners who can pay the twenty percent down payment required by many lenders to avoid paying private mortgage insurance.
Joel Kan is an economist with an MBA. He states, “Fewer homeowners have a strong incentive to refinance at current rates.” In fact, a full quarter of all homeowners right now have interest rates lower than three percent. Many others have mortgage rates between three and five percent. Homeowners are aware that taking out a new mortgage has certain costs. This can add to the overall cost of owning the property. A mortgage holder needs a mortgage rate that is at least fifty basis points lower than their existing rate in order to really reduce their homeownership costs.
Strong Housing Demand
Housing demand continues to be strong all over the United States. At the same time, supply is even lower than normal. Many areas of the country have seen a vast rise in the cost of local housing. Higher mortgage rates are having an impact on many buyers. This is particularly true when it comes to those who are buying a home for the first time. Many have little room in the budget to cope with a rise in mortgage rates.
Market watchers are not sure what is going to happen next. The Federal Reserve is expected to make a new announcement about monetary policies in the coming week. The fed purchases of bonds that are backed by mortgages. As a result, mortgage rates fell drastically many times in the last year. Officials expect this to come to an end. This will have a massive impact on mortgage rates as a whole for all buyers.