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Mortgage Rates
Mortgage Rates, Pets

Easy Ways to Keep Your Pet Secure

Easy Ways to Keep Your Pet Secure

Michelle’s dogs

Lauren from L Bee and the Money Tree wrote recently about how her dog, Murray, decided to take a little jaunt around the neighbourhood at 11pm in the middle of the rain storm, leaving her a nervous wreck until she found him.

While this story ends well, it’s one we’ll all familiar with. I’ve been a victim of it myself. My dog Molly pulled the same trick on me last summer, except she was a full half mile away when she was found.

Dogs and cats disappear every day. Some estimate that 10 million are reported missing every year. If you own a pet, odds are, it’s going to give you the slip at some point in its life, and go missing. Hopefully your story will have the same happy ending mine and Lauren’s did, but to improve those odds, here are some ways you can keep your pet keep your pet from escaping, and help ensure it’s found quickly.

Secure Your Parameter

Many, many dogs will take any opportunity to go exploring their neighbourhood, and an open backyard gate the perfect temptation. To help protect against this possibility, install an automatic closing device on your gates to ensure that if they are left open for any reason, they’ll close on their own.

In addition to this, consider installing an underground electric fence, which will deter against fence digging and wandering out of an open gate. I have one installed around the parameter of my property, and my dog Molly has rarely wandered off. The cost of one of these fences can be as low as a few hundred dollars, and is money well spent. There are even options available for cats!

Register Your Pet

In most cities, dogs are required to be registered, and will receive an ID tag to attach to their collar. This ID tag will contain a ID number and toll free number to call. Anyone who finds a dog with an ID tag, will have a way of getting in contact with the owner.

One caveat to this method: Don’t forget to update your pet’s info when you move! Otherwise, your contact information will be out of date and the people who found your pet will have no way of getting in contact with you. Registrations are typically inexpensive, renewable yearly and often required by law.

Microchip Your Pet

This is a great option for both cats and dogs, and is widely available at your local vet’s office. Instead of an ID tag, the vet will insert a small microchip underneath your pet’s skin. The chip will be readable by a scanner that most vet’s offices and animal shelters are equipped with. This is particularly beneficial if a pet is found by animal control.

It also has the benefit of always being with your pet, even if they slip out of their collar and have no tags on them. As I mentioned above, don’t forget to update this information when you move! This isn’t typically expensive, it cost me $10 to have my dog Molly microchipped at the SPCA.

Have a “Go” Plan

Sometimes, despite your best intentions, your pet ends up missing. In these situations, having a plan in place to recover your pet could mean the difference between a few hours of searching and a few weeks. Have a “Lost Pet” poster prepared and saved on your computer, so that you can easily and quickly print out several posters to put up around the neighbourhood. Become acquainted with the local lost pets Facebook groups and message boards so you can quickly and easily get the word out to the local community. Finally, don’t forget to call your local shelter and vet’s offices with a description of your pet, in case animal control or a concerned citizen turns him or her in. By quickly publicizing the fact that you are looking for your pet, you increase the number of people keeping an eye out, thus increasing the chances your pet will be found.

No one likes to think about the fact that some day, you might be trudging the streets of your neighbourhood, calling your pet’s name. By taking these simple and inexpensive precautions  you can minimize the chance of harm coming to your pet, and increase the odds of a happy ending to your pet’s adventure.

Have you ever lost a pet? I want to know!

 

The post Easy Ways to Keep Your Pet Secure appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

Money Management, Money Tips, Mortgage Rates

Mortgage Rates Continue to Rise

Mortgage rates are continuing to move higher this week. We’ve now seen them rise for two consecutive weeks in the Freddie Mac PMMS. The consensus is for them to continue rising for the foreseeable future. Read on for more details.

Where are mortgage rates going?                                             

Mortgage rates rise in the Freddie Mac PMMS again

Mortgage rates have moved higher for the second straight week according to the Freddie Mac Primary Mortgage Market Survey (PMMS). Here are the numbers:

  • The average rate on the 30-year fixed rate mortgage moved two basis points higher to 4.54% (0.5 points)
  • The average rate on a 15-year fixed rate mortgage ticked up two basis points to 3.99% (0.4 points)
  • The average rate on a 5-year adjustable rate mortgage moved up eight basis points to 3.93% (0.3 points)

Here is what Freddie Mac’s Economic and Housing Research Group had to say about mortgage rates this week:

“The 30-year fixed-rate mortgage inched higher for the second straight week.

Borrowing costs may be slowly on the rise again in coming weeks, as investors remain optimistic about the underlying strength of the economy. It’s important to note that mortgage rates are now up three-quarters of a percentage point from last year and home prices – albeit at a slower pace – are still outrunning rising inflation and incomes.

This weakening in affordability is hindering many interested buyers this fall, even as the robust economy brings them into the market. The good news is that purchase mortgage applications have recently rebounded to above year ago levels.”

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Rate/Float Recommendation                                    

Lock now before rates move even higher         

Mortgage rates have risen these past few weeks and that trend is expected to continue over the coming months as the Federal Reserve gets ready to, and does, increase the nation’s benchmark interest rate.

If you are planning to buy a home or refinance your current mortgage, we strongly recommend that you lock in a rate sooner rather than later. The longer you wait, the more likely it is that you’ll get a higher rate.

Learn what you can do to get the best interest rate possible.  

Today’s economic data:             

ADP Employment Report

The ADP employment report showed 163,000 jobs added to the U.S. economy in August.

Jobless Claims

Applications filed for unemployment benefits in the U.S. came in at 203,000 for the week of 9/1/18. That’s 10,000 fewer than the previous week, bringing the four-week moving average to 209,500.

Productivity and Costs

Nonfarm productivity rose 2.9% Q/Q in the second quarter of 2018. Unit labor costs fell 0.1%.

PMI Services Index

The PMI Services Index came in at 54.8 for August.

Fedspeak

San Francisco Fed President John Williams is set to speak at 10:00am.

Factory Orders

Factory orders fell 0.8% month over month in July.

ISM Non-Mfg Index

The ISM Non-Mfg index hit a 58.5 in August, up a little from July.

EIA Petroleum Status Report

For the week of 8/31:

  • Crude oil: -4.3 M barrels
  • Gasoline: 1.8 M barrels
  • Distillates: 3.1 M barrels

Notable events this week:     

Monday:   

  • Markets Closed

Tuesday:   

  • PMI Manufacturing Index
  • ISM Mfg Index
  • Construction Spending

Wednesday:         

  • Fedspeak

Thursday:     

  • ADP Employment Report
  • Jobless Claims
  • Productivity and Costs
  • PMI Services Index
  • Fedspeak
  • Factory Orders
  • ISM Non-Mfg Index
  • EIA Petroleum Status Report

Friday:          

  • Employment Situation
  • Fedspeak

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*Terms and conditions apply.

Source: totalmortgage.com

Mortgage, Mortgage Rates, Quick Cash

Rising mortgage rates push applications lower

For the second week in a row, mortgage applications decreased – this time, down 4.1% for the week ending Jan. 22, according to data from the Mortgage Bankers Association. The 30-year-fixed rate rose to 2.95%, its highest level since November 2020, according to Joel Kan, MBA associate vice president of economic and industry forecasting.

All other mortgage rates in the survey posted a decline.

“In a sign that borrowers are increasingly more sensitive to higher rates, large declines in government purchase applications and refinance applications pulled overall activity lower,” Kan said. “Purchase applications also decreased last week, but the impressive trend of year-over-year growth since the second half of 2020 has continued in early 2021.”

The seasonally adjusted purchase index decreased 4% from one week earlier, while the unadjusted purchase index increased 3 % compared with the previous week.

The refinance index has now declined two straight weeks, but is still 83% higher than last year.


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Kan noted that the unadjusted purchase index was still 16% higher than the same week one year ago.

“Since hitting a recent low in April 2020, the average purchase loan amount has steadily risen – in line with the accelerating home-price appreciation occurring in most of the country because of strong demand and extremely low inventory levels,” he said.

The FHA share of total mortgage applications increased to 9.4% from 9.3% the week prior. The VA share of total mortgage applications decreased to 12.4% from 13.8% the week prior.

Here is a more detailed breakdown of this week’s mortgage application data:

  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 2.95% from 2.92%
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) decreased to 3.17% from 3.19%
  • The average contract interest rate for 30-year fixed-rate mortgages decreased to 2.88% from 3.01%
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.43% from 2.48%
  • The average contract interest rate for 5/1 ARMs decreased to 2.60% from 2.76%

The post Rising mortgage rates push applications lower appeared first on HousingWire.

Source: housingwire.com

Money Management, Money Tips, Mortgage Rates, Refinance

Mortgage Rates vs. Fed Announcements

Posted on March 3rd, 2020

File this one under “no correlation,” despite a flood of news articles claiming the Fed’s rate cut directly impacts mortgage rates.

Today, the Fed cut the federal funds rate by half a percentage point to a range of 1-1.25% due to the uncertainty surrounding the coronavirus, this despite a strong U.S. economy.

That sent mortgage rates trending and the media into overdrive, searching for possible angles.

You can’t blame them (the media) – it makes for a good headline, but much of what is thrown out there usually isn’t true or anything to worry about.

In most cases, it’s excitement-inducing or fear mongering, or simply something to fill the page.

It tends to be a regurgitated article that comes out around the time the Fed meets, which is every six weeks throughout the year (eight times annually).

Whenever a Fed announcement comes along, you’ll start to see an uptick in articles about what mortgage rates will do when the Fed speaks, with the most common ones being “rates expected to rise” or “rates could move even lower thanks to Fed rate cut.”

Or you’ll get straight up definitive articles warning you about the impending rate rise and what you should/can do to mitigate the damage.

The problem is it’s simply not accurate and these tend to do more harm than good.

The Fed Doesn’t Announce Mortgage Rates

  • The Fed doesn’t set or announce consumer mortgage rates
  • Regardless of the misinformation you’ll find out there
  • When they announce a Fed rate change
  • Mortgage rates may go up or down (or do nothing!)

When the Fed gets together to set the target rate for the Federal Funds Rate, financial markets (stocks, bonds, etc.) pay attention and react.

As does the media because it’s generally a big deal. But Jerome Powell and co. don’t sit down and decide which way mortgage rates will go.

Rather, they discuss the state of the broader economy, inflation, monetary policy, and so on.

They almost never mention mortgages explicitly, except for in recent years thanks to the remnants of the quantitative easing program known as QE3.

No Correlation Between Fed Funds Rate and Mortgage Rates

fed funds vs mortgage rates

Additionally, there’s no clear correlation between the Federal Funds Rate and mortgages.

In other words, one can go up while the other goes down. Or one can do nothing while the other does something. Or they can move in the same direction for a while.

But the spread between the two won’t remain in a certain range over time like mortgage rates and the 10-year bond yield do.

You can’t say the 30-year fixed should be X% higher or lower than the Fed Funds Rate at any given time.

As you can see from the St. Louis Fed chart above, the 10-year yield and the 30-year fixed (based on Freddie Mac data) move in relative lockstep.

You can see the blue line and red line move in a very similar fashion over the years with a pretty steady spread. Then there’s the green line (Fed Funds Rate), which is all over the place.

Sometimes you see a long-term trend, but other times you see no apparent correlation.

Check out the second graph below, from 2000-2010, which shows some similar movement between the FFF and mortgage rates, but at times no obvious relationship.

decade compare

In short, mortgage rates don’t necessarily follow the Fed, whether that’s up, down, or nowhere at all.

The Fed Indirectly Influences Mortgage Rates

  • A more accurate way of defining the relationship
  • Is that it might be an indirect, long-term one
  • If the Fed is raising rates over time
  • Long-term mortgage rates may eventually follow

Some may argue that the Fed indirectly influences mortgage rates. Really, the Fed is just trying to control inflation via short-term rates. This in turn dictates how longer-term rates may play out.

Essentially, the market for longer-term rates such as 30-year mortgages (and mortgage-backed securities) might seek direction from Fed cues.

The Fed tends to telegraph its moves well in advance, so it’s pretty rare for anyone to get too surprised the day they release their FOMC statement.

Today was a little different since it was an “emergency rate cut,” but it still wasn’t totally unexpected. Again, the Fed is pretty conservative.

Anyway, they do give an indication as to which way we’re (the economy is) headed and what kind of monetary policy is in store, which can be important to longer-term rates, such as 30-year fixed mortgages.

That means the Fed statement can have an immediate impact on mortgage rates on the day it’s released, to the point where lenders may need to reprice ratesheets from morning to afternoon.

But that reprice can completely counter the Fed’s move. For example, the Fed can lower its key rate while mortgage lenders reprice rates higher. Or do absolutely nothing.

Mortgage Rates Can Go Either Way…

  • Pay attention to Fed announcements when they’re released
  • But don’t give them too much weight or worry about them
  • Or think you can predict what will happen to mortgage rates
  • Since there’s no clear short-term correlation

So, Fed announcements can affect mortgage rates, but how they’ll affect mortgage rates is mostly a crapshoot.

You can’t say oh, the Fed lowered rates so my 30-year mortgage will be lower too. And you can’t say oh no, the Fed raised rates, I should have locked my mortgage!

The mortgage rate trend lately has without a doubt been lower, but we’ve reached a point where rates are at/near all-time lows, making it increasingly difficult for them to get any better.

Ultimately, lenders don’t even have the capacity (staff, etc.) or the desire to lower rates because they’re probably already swamped.

Then there are the MBS investors to worry about, who won’t be thrilled about all the prepayments happening.

In summary, it can be a mystery as to how things will go post Fed statement, and you can always get hung out to dry. That’s why floating a mortgage rate isn’t for the faint of heart.

But again, the Fed’s move may have no bearing on your mortgage rate, at least not today, or tomorrow. Or even next week.

The Fed might just be good at telling us which direction mortgage rates are headed (eventually) based on policy and broader economic conditions.

If you’re wondering why mortgage rates haven’t improved after the announcement today, perhaps it was already baked in. And as noted, it’s getting really hard to move even lower.

I don’t know if lenders want to give you a 2% 30-year fixed.

You could argue that mortgage lenders were ahead of the Fed on this one, with rates marching lower for weeks on end lately.

Just remember this; lenders will use any excuse to raise mortgage rates, but take their sweet old time lowering them.

That means we could even see more improvement in coming days and weeks, but not because of the Fed. More so due to economic unknowns globally.

Tip: The only direct mortgage impact you’ll see from a Fed announcement is an increase or decrease in the prime rate, which affects the pricing of HELOCs, among other consumer loans. Everything else is indirect and not necessarily correlated.

(photo: Federalreserve)

Source: thetruthaboutmortgage.com

Money Tips, Mortgage Rates, Mortgage Tips, Moving Guide, Refinance

Watch Out for Low Mortgage Rates You Have to Pay For

Posted on November 4th, 2020

Mortgage rates keep on marching lower and lower, with new records broken seemingly every week.

But with all the fervor surrounding mortgage rates, some lenders are playing the “how low can we appear to go” game.

For example, mortgage lenders may be talking about their lowest rates (with multiple points required), as opposed to offering their par rates, the latter coming at no extra cost to the consumer.

So instead of being presented with a mortgage rate of say 2.75% on a 30-year fixed, you may see a rate as low as 1.99%. Or even a 15-year fixed at 1.75%!

Here’s the problem; with mortgage rates breaking record lows time and time again, 10+ times so far in 2020, many homeowners are finding the need to refinance the mortgage twice. Or even three times.

And those who chose to pay points at closing, only to refinance within months or a year, essentially left money on the table.

Or they decide not to refinance to an even lower rate, knowing they’ll lose that upfront cost that’s already been paid, which is also a tough situation.

Mortgage Rates Aren’t as Low as They Appear

  • In order to advertise lower mortgage rates lower than the competition
  • Lenders will often tack on discount points to their publicized rates
  • Meaning you’ll have to pay a certain amount upfront to obtain the low rate in question
  • Make sure you’re actually comparing apples to apple when mortgage rate shopping

Guess what? That absurdly low mortgage rate you saw advertised isn’t really as low as it seems.

Typically, when you see a rate that’s beating the pants off the national average, and all other lenders, mortgage points must be paid.

And when the rate is really, really low, it usually means multiple mortgage points must be paid.

In other words, you wind up paying a substantial amount of money, known as prepaid interest, to secure an ultra low, below-market interest rate.

Assuming your loan amount is $200,000, two points to obtain a rate of 1.99% on a 30-year fixed would set you back $4,000.

If the loan amount were $400,000, we’re talking $8,000 upfront to secure that super awesome low rate.

Tip: Watch out for lenders and mortgage brokers who quote you a low mortgage rate, but neglect to tell you that you must pay a point (or two) upfront to obtain it.

Often, this tactic is employed to snag your business, and once you’re committed, the truth comes out, which is why mortgage APR is so important.

Is Paying for an Even Lower Mortgage Rate Right Now the Smart Move?

  • When mortgage rates are already really low (record lows at the moment)
  • It becomes somewhat less attractive to pay points at closing
  • It could be pretty expensive to get just a slightly lower rate that will save you very little
  • And your money might be better served elsewhere, especially if inflation worsens

Here’s the thing. Mortgage rates are already so low that paying mortgage discount points to go even lower isn’t all that attractive.

There’s a great chance mortgage rates will surge higher in the future as inflation finally rears its ugly head. And at that point, you’ll already have an insanely low interest rate.

On top of that, you’ll be able to invest your liquid assets in other high-yielding accounts, likely something pretty darn safe with a rate of return that will beat your low mortgage rate.

So why keep going lower and lower if you’re already paying next to nothing on your home loan?

Additionally, you won’t want to spread yourself too thin, especially if you’re buying a new house.

There are a ton of costs associated with a new home purchase, so committing all your liquidity to an even lower rate could mean that you won’t have money for relocation costs, furnishings, necessary repairs, or an upgrade.

And as mentioned, mortgage rates do have the potential to move even lower than current levels, meaning it could make sense to refinance again, favoring those who didn’t pay much to anything at closing.

Or better yet, just went with a no cost refinance to avoid paying anything to the bank or lender.

As always, do the math to see what makes sense for you. If you’re super serious about paying off your mortgage early, then buying down your rate could be the right move.

It will certainly vary based on your unique financial situation, the loan amount, the cost to buy down the rate, and how long you plan to stay with the loan/home.

Certainly take the time to compare mortgage rates with and without points, but don’t just chase a low rate below an emotional threshold, like 2%.

And determine how long it’ll take to pay back any points at closing with regular monthly mortgage payments.

Personally, locking in a 30-year fixed rate below 3% seems like a tremendous bargain.

Investing the money elsewhere, such as in stocks or bonds or wherever else, could end up being a lot more rewarding than paying prepaid interest at closing.

Perhaps more importantly, you’ll have access to that money if and when necessary for more pressing matters.

Lastly, you can always pay extra each month if and when you choose to reduce your principal balance and total interest paid. So that’s always an option regardless of the rate you wind up with.

Read more: Are mortgage points worth the cost?

Source: thetruthaboutmortgage.com

Money Management, Money Tips, Mortgage News, Mortgage Rates, Refinance

Don’t Freak Out About the Recent Mortgage Rate ‘Spike’

Posted on January 15th, 2021

Queue the panic. Mortgage rates have officially spiked and the media is all over it.

Yep, the average rate on a 30-year fixed mortgage increased from 2.65% to 2.79% this week, per Freddie Mac’s weekly survey.

Freddie Mac Chief Economist Sam Khater noted in the weekly news release that mortgage rates have been under pressure as Treasury yields have risen.

But he did stress that “while mortgage rates are expected to increase modestly in 2021, they will remain inarguably low.”

So he’s not panicking, even though the Washington Post and other news outlets are leading with articles about “mortgage rates spiking.”

When it comes down to it, a 14-basis point move isn’t what I’d refer to as a “spike,” but yes, mortgage rates are higher than they were last week.

But they are still well below the 3.65% average seen at this time a year ago.

Why Have Mortgage Rates Increased Lately?

rates

  • 30-year fixed mortgage rates have fallen to and hovered close to record lows for months
  • It’s inevitable to see some upward pressure after such a long period of record-breaking movement
  • One driver could be the bond selloff, which lower prices and increases yields
  • This might relate to the Democrats winning the Senate and increasing stimulus spending

As noted, mortgage rates are no longer at record lows, and are in fact closer to 3% than 2%. So should we all freak out?

I’m going to go with no. While the media is using the word “spike” in their articles, perhaps to make its relatively boring weekly report a little more interesting, things aren’t that bad.

Remember, mortgage rates are only marginally higher, and probably not high enough to change anyone’s position on buying a home or refinancing their mortgage.

Sure, there’s a chance someone’s monthly mortgage payment now exceeds the max DTI allowed for the loan, but if you were cutting it that close, you’re probably buying too much home.

As to what’s causing the recent upward reversal, mortgage rate watcher Matthew Graham seems to think it relates to the bond sell-off as a result of the Democrats taking over the Senate.

Simply put, the government issues Treasuries to fund additional COVID-related stimulus, which while good for the economy and struggling households, increases bond supply.

The result is lower bond prices, which forces the accompanying yields (or interest rates) higher.

And because Treasuries correlate with long-term mortgage rates like the 30-year fixed, borrowers will pay more to finance their homes.

Is This the End of Low Mortgage Rates Forever?

  • Let us remember that mortgage rates started off 2021 at all-time record lows
  • So it’s not surprising for them to rise off those levels if there’s any pressure whatsoever
  • I fully expect mortgage rates to hit new lows at some point this year
  • But you’re always going to see ebbs and flows over the course of 365 days

While it’s easy to let your fears and emotions get the best of you, perhaps we shouldn’t call an end to the low-rate party just yet.

Ultimately, mortgage rates ebb and flow, similar to how stocks go up and down from day to day, or week to week.

Yes, it’s easy to get caught up in the psychology of it all and panic, but I just don’t believe we’ve seen the end of the low rates.

Additionally, there may even be more record lows in store for 2021.

Remember, the first week of 2021 resulted in new all-time lows for both the 30-year fixed and 15-year fixed, so it’s kind of far-fetched to sound the alarm.

This isn’t to say we don’t experience a period of relatively higher rates, it’s just that it could be short-lived.

Remember, the presidential inauguration is next week and there are thousands of National Guard protecting the Mall in Wasington D.C and holed up in the Capitol Building.

If that gives you confidence that good times are ahead, well, I don’t know what to tell you.

Not trying to be an alarmist, but there’s just too much uncertainty in the air for interest rates to flourish.

In short, bad news tends to lower rates, while good news increases them. I don’t see much good news, even with all that proposed government spending taken into account.

A month ago, the Federal Reserve said it would be keep its short-term interest rate near zero for the foreseeable future as the economy attempts to recover from the COVID-19 pandemic.

They also indicated that they’d continue to buy Treasuries and mortgage-backed securities (MBS) at the current pace until “substantial progress” is seen in the economy.

Call me a pessimist, but I don’t see anything positive happening with the economy this year, or even next year.

I think we’ve all been ignoring the elephant in the room while watching the stock market reach new all-time highs. At some point, reality will hit.

Ultimately, as long as they’re continuing to buy the mortgages this month and next, lenders will continue to make them at low, low rates.

Time will tell if rates will need to rise on long-term fixed mortgages as the Fed eventually exits the marketplace.

Is It Best to Lock Now or Wait?

  • Times like this exemplify the importance of locking in your mortgage rate
  • You are typically given the choice to lock or float your interest rate once you apply for a home loan
  • If you like what you see, lock it in and don’t give it another thought
  • If mortgage rates shoot up quickly, it could be wise to float and wait for things to calm down

My guess is fixed-rate mortgages will settle down and begin making their way back to lows seen earlier this month.

Of course, mortgage lenders are always quick to raise rates, and a lot more patient when it comes to lowering them (at our expense).

You can’t blame them though – they don’t want to get caught out if volatile rates change direction and they’re on the wrong end of that.

Times like these really exemplify the importance of locking in your mortgage rate. No one cares or complains until rates increase.

If you’re happy with your quoted rate, lock it in and forget about it.

If you’ve got some time before funding, maybe float a bit and wait for some improvement.

After all, the more time you have, the more chances you’ve got for rates to move lower.

And you can always lean on your loan officer or mortgage broker if you’re not sure what to do. Most of the experienced ones keep a keen eye on rates.

In summary, you don’t need to panic, but you should be aware of the fluid situation if you’re looking to refinance or buy a home in 2021.

It might also be a good time to consider how long you plan to stay in your home as well.

That could dictate your mortgage decision and whether or not to pay mortgage points for an even lower rate.

Source: thetruthaboutmortgage.com

Money Management, Money Tips, Mortgage Rates, Mortgage Tips

When Are Mortgage Rates Lowest?

We’re all looking for an angle, especially if it’ll save us some money.

Whether it’s a stock market trend, a home price trend, or a mortgage rate trend, someone always claims to have unlocked the code.

Unfortunately, it’s usually all nonsense, or predicated on the belief that what happened in the past will occur again in the future.

Sometimes history repeats itself, sometimes it doesn’t. We probably only hear about the times when it does because it makes the individual behind it sound like a genius.

In reality, it’s very difficult to predict anything, even the weather, so when it comes to complex stuff like mortgage interest rates, success rates probably move a lot lower.

That being said, I set out to see if there were any mortgage rate trends we could glean from available data, using Freddie Mac’s historical mortgage rates that go back to 1971.

Using 50 years of data, you would think some trends would appear, right?

Were mortgage rates lower in certain months, higher during others, or is it all just random? Let’s find out.

What Time of Year Are Mortgage Rates the Lowest?

mortgage rates by month

I looked at monthly averages for the 30-year fixed-rate mortgage over the past three decades to determine if there’s a winning month out there.

It turns out there is a month when mortgage rates are lowest, and as you might expect, it’s at a time when most folks wouldn’t even be thinking about purchasing a home or refinancing an existing mortgage.

Yes, it’s December. You know, when individuals are more concerned with holiday shopping and traveling to see family then calling up a mortgage lender.

This could explain why mortgage rates are lowest in December. If you recall, lenders pass on bigger discounts to consumers when things are slow.

As alluded to, December is always going to be a slow month for mortgage lenders, which probably has something to do with the discount seen over the past 30 years.

Keep an Eye Out for a Mortgage Rate Sale

  • Mortgage lenders operate just like other types of businesses selling products or goods
  • They price their loans based on expected profit margin and operational costs
  • If their business slows down they might be inclined to lower the price (or interest rate)
  • But if they’re doing a lot of business (or even too busy) they might keep rates artificially high

Similar to any other company out there selling goods, there are “sales” at certain times throughout the year, and also times when prices are marked up.

As you might expect, if a company is trying to move product, in this case home loans, what do they do? They lower the price to drive business.

Mortgage lenders able to lower the price, or rate, because they’ve got a margin built in to their market rate.

This margin acts as their profit, minus operational costs. Sure,they may not make as much per loan if they lower rates for consumers, but they could make up for it on volume.

Instead of closing one higher-priced loan, they might be happy to close three loans and earn more on aggregate. So they have wiggle room to play with rates a bit.

They can adjust them lower when business is crawling, and simply maintain or raise them when their phone won’t stop ringing.

How Much Cheaper Can They Really Be?

  • While mortgage rates are measured in eighths of a percent (0.125%)
  • Which may look or sound like absolutely nothing when comparing rates
  • The small difference can be exponential because you pay the mortgage each month for years (possibly 30!)
  • This explains why even a marginal difference in rate can amount of thousands of dollars over time

Okay, so we know rates vary throughout the year, and even a small difference in rate can be very meaningful. But how much can you really save?

While not massive by any stretch, you might be able to get a rate .25% lower in December versus April. Same goes for October and November compared to spring.

If we’re talking about a $300,000 loan amount, a rate of 2.75% vs. 3% is the difference of roughly $40 per month, or nearly $500 per year.

Keep your mortgage for a decade and you’ll pay nearly $5,000 more over that period.

Are You Overpaying for Your Home Loan and House in April?

  • The most common time to buy a home is in spring, namely April
  • This is when prospective buyers get serious and make offers
  • It’s also when more home sellers finally agree to list their properties
  • But it might be cheaper to buy a home during fall or winter

Now speaking of April, that month tends to be prime time for home buying historically, which explains the lack of a discount.

The same goes for buying a home during April – it’s a lot less common to see a price reduction during spring than it is during fall or winter.

It all begs the question; should we buy homes when prices, competition, and interest rates are lowest? Probably.

Just one problem – there tends to be less available inventory in the fall and winter months as well. But if you do come across something you like, it could be a great time to snag a deal.

In other words, you should always be looking, even if it’s not the ideal time to move.

If you’re refinancing a mortgage, there are less obstacles in December since you’ve already got a house.

To sweeten the deal, lenders probably aren’t busy, so you’ll breeze through underwriting a lot quicker. And you could receive a little more attention from your loan officer.

Should I Wait Until December to Get a Mortgage?

In short, probably not. While December had the lowest mortgage rates on average over the past 30 years, there were plenty of years when rates were higher in December compared to other months.

Take 2018, where the 30-year fixed averaged 4.03% in January and 4.64% in December.

Same goes for 2015 and 2016, when rates were markedly higher in December versus the beginning of the year.

However, in 2020 the 30-year fixed averaged 3.31% in April and 2.68% in December, which is a difference of 0.63%. That can equate to thousands of dollars in savings.

All in all, you’re probably better off paying attention to what’s going on in economy if you want to predict the direction of mortgage rates.

The trend (moving up or down over a period of time) might be more important than the month of year.

Simply put, bad economic news generally leads to lower mortgage rates, whereas positive news tends to propel interest rates higher.

Time of year aside, you might be able to save even more on your mortgage simply by gathering quotes from more than one lender.

Ultimately, timing doesn’t seem to be the biggest driver of rates, nor is it something most of us can control anyway.

(photo: Marco Verch)

Source: thetruthaboutmortgage.com