A Look Back and Forward: Making Sense of Today’s Latest Mortgage Rates

A Look Back and Forward: Making Sense of Today’s Latest Mortgage Rates

 

Whether you’re a first-time homebuyer, already own a home, looking to move, or just want to educate yourself, Benton Capital recommends you understand WHY mortgage rates move up or down daily.

This is crucial to being prepared for future opportunities — first-mortgage purchases, refinances (technically a new mortgage), or even second mortgages and home equity lines of credit (HELOCs).

Here’s a quick guide to keep you informed and ready:

  •            The rate on a 30-year conventional mortgage stooped to a record low of 3 – 3.25 percent in June of 2020. Could it drop even lower? Nobody can predict this, only make educated guesses. However, it is possible this rate could drop even lower, and if it does, be prepared to move quickly. Experts at investment firms, hedge funds, analytics companies, and economic consultancies get paid to predict this movement every day. The 30-year mortgage interest rate has slowly dropped to this record low from a record high of about 18.5 percent in 1981. Nobody in their wildest dreams could have forecasted rates would drop this low over the past few years. Just remember: a highly liquid financial market like we have in the United States — affected daily by investor bets, economic data, government fiscal policy, and signals from the Federal Reserve — means mortgage rates go up and down constantly in the short term. Benton Capital analyzes mortgage rates daily and can quickly assess your situation to provide the right rate guidance.

 

  •          Want to know which way 30-year and 15-year mortgage rates are headed? Keep your eye on the 10-year U.S. Treasury bond rate. Because investors lend money through the financial markets to make mortgages available to consumers (similar to when investors lend money to the U.S. government), the average mortgage rate follows the 10-year treasury bond rate. You can keep tabs on this treasury bond rate anywhere online, such as CNBC’s daily tracker. If the 10-year treasury rises or falls, usually mortgage rates will go up or down in tandem. They are not exactly in sync, but close enough. Do you know someone who recently snagged a mortgage rate of 3.5 percent APR (annual percentage rate)? It means in the days leading up to locking in that mortgage rate, a 10-year government treasury bond was hypothetically paying approximately 1.7 percent — essentially 1.8 percent lower than your friend’s 3.5 percent mortgage rate. Benton Capital has a track record of delivering some of the most competitive rates on the market as it proactively keeps track of daily rate changes.

 

  •          You can usually always refinance your mortgage rate with the right credit score, debt-to-income ratio (DTI), ability to repay, and plenty of home equity — whether into a lower rate or higher rate. Over the past four decades, homeowners have usually always refinanced into lower rates, whether it’s to save on monthly payments, decrease the number of payment years on the loan, or cash-out money. Although rarely seen, refinancing into a higher rate is an option if you need to cash-out money to pay down other debts with higher interest rates than your mortgage rate. Regarding a lower rate, it’s usually not worth refinancing into one unless today’s mortgage rates are about 0.5 percent lower than what you’re currently paying. For example, if the remaining principle on your current mortgage is about $400,000 and you’re paying 4 percent interest, you could save $113 per month by refinancing down to 3.5 percent; $169 a month at 3.25 percent; and $223 per month at 3 percent. Mortgage rates move up or down in 1/8th-percent increments (or 0.125 percent) since this is appeasing to all involved — borrowers, loan officers, lenders, and financial market investors. Benton Capital meets borrowers where they are and realizes their specific needs to propel them forward.

 

  •          Mortgage availability and homeownership is nearly the highest it’s ever been in U.S. history — and most congressional lawmakers say they want to keep it this way. From the late 1800s to early 1900s, it was difficult for many low and middle-class families to get a mortgage. The interest on the principal borrowed was usually extremely high, and sometimes the loan was made by a questionable lender with no regulatory or ethical transparency. Fast forward to today — we have a much more systematized approach to connecting large amounts of money (investors) with mortgage borrowers like you, including households of all income levels and rural residents. Several borrowing programs created for people living in all types of geographic regions and circumstances are offered by federal government agencies such as Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Department of Housing and Urban Development (HUD), Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA). The U.S. homeownership rate reached 65 percent by 1975 before hitting a record 69 percent by 2005, but fell back to 65 percent by 2019. Benton Capital was founded to propel first-time buyers to realize their dream of homeownership, and to assist current owners in their search for the best financial solution.

 

  •          Rates are much more influenced by the supply of investor capital, risk-taking, and financial market liquidity on Wall Street than the consumer demand for mortgages. Every week, thousands of institutional investors need low-risk financial assets to plow money into, as well as something they can easily sell the very next week, month or year if needed. These are called mortgage bonds and they are sold on the “secondary mortgage market” — just one type of thousands of bonds bought and sold every day by investors. They have a dollar value which rises or falls daily. While some mortgage-bond investors are long-term holders, others just need a safe asset they can hold onto in the short run before selling and parking their money elsewhere. However, many mortgage investors are in it for the long-term, providing ample capital for borrowers. Benton Capital does the homework and thinking for you, and it’s committed to helping you find the right path to the best mortgage.

 

Although the mortgage world is a bit more complex than this, don’t be concerned. Benton Capital is a leader in proactively staying ahead of the curve to meet your exact needs. If you’re in the market for a home or a new mortgage, be sure to educate yourself, stay informed, and be ready at a moment’s notice to move quickly on a great rate and program made just for you.