Other than a devastating global pandemic, what will 2020 be known for? The year of the refinance. Rates hit unprecedented lows, which brought out borrowers in droves. But not everyone was in the position to refinance their mortgage during the height of a deadly pandemic.
With unemployment at record highs, many families were focused on simply making it from one day to the next, not shopping around for new mortgage contracts. If you're starting to get back on solid financial ground and are looking toward the future, you may be wondering if now is still a good time to refinance your mortgage. Here's what you need to know!
Interest Trends Over Time
When it comes to timing a mortgage refi, it's important to understand what has been happening in the market, so let's take a look at how 2020 played out.
Rates for 15-Yr FRM with 0.6 fees/points.
Here's information outlined by FreddieMac.com.
- January: 3.0%
- February: 2.95%
- March: 2.92%
- April: 2.77%
- May: 2.62%
- June: 2.59%
- July: 2.51%
- August: 2.46%
- September: 2.40%
- October: 2.32%
- November: 2.28%
- December: 2.17%
What was the rate in December of 2019? 3.19%. It's easy to see how mortgage interest rates are affected by what's happening in the country. The COVID-19 shutdown caused rates to plummet to lows that haven't been seen in years.
For those who were interested in lower monthly installments, even 30-year options were quite competitive.
Rates for 30-Yr FRM with 0.7 fees/points.
Here's what those numbers looked like during 2020.
- January: 3.51%
- February: 3.45%
- March: 3.50%
- April: 3.23%
- May: 3.15%
- June: 3.13%
- July: 2.99%
- August: 2.91%
- September: 2.90%
- October: 2.81%
- November: 2.72%
- December: 2.67%
Rates were almost an entire percentage point lower from January to December, which meant that those who refinanced were able to save a significant amount of money.
Declining rates like these are not typical. In fact, if there is not an event that impacts the economy, mortgage interest rates increase as the years go on. That's good information to know when it comes to contemplating your mortgage refinance timeline.
Where the Market Is Headed
By understanding where we're coming from and where we're headed, it's easier to determine if now is still a good time to refinance a mortgage. So, where is the market headed?
According to the Mortgage Brokers Association's Mortgage Finance Forecast report, as of May 19, 2021, rates are headed for sharp increases! According to their data, a 30-year fixed-rate mortgage during the first quarter of 2021 was at 2.9%, which is already an increase from where it ended in 2020.
Q2 is expected to hit 3.1%, Q3, 3.3% and Q4, 3.5%.
Will there be any relief in 2022?
Unfortunately, forecasts point to just the opposite. The Mortgage Bankers Association predicts rates to hit 3.7%, 4.0%, 4.1%, and 4.2% for next year's four quarters. With a projection of 4.9% in 2023, borrowers can expect rates to climb to the 5% realm before too long.
Should I Refinance My Mortgage?
So, is it still a good time to refinance your mortgage? Absolutely. If you hold off on doing so even for a few months, moving from one quarter to the next, there's the potential to lose a significant amount in savings.
An interest rate that's one or even half a percent lower than what you currently pay could save thousands over the life of your loan. The key is to act quickly. While ultimately you may decide to hold off on refinancing, it never hurts to see what rates you qualify for.
Refinancing can accomplish a number of goals, so no matter what it is you're looking to do–eliminate private mortgage insurance, shorten your term, lower your monthly payments, or any other number of goals–locking in a competitive interest rate before they have a chance to increase could help you accomplish your goal while saving money; that's a win-win for borrowers!
Explore Your Options Today
If you'd like to get a feel for what mortgage providers have to offer, team up with Lendgo, a free platform that connects borrowers and lenders.
Did you know that borrowers who compare refi providers typically go on to save more than those who work with just one?
While some aspects of a mortgage refinance can't be negotiated, you can negotiate things like closing costs, as many of the fees that make up closing costs are set by the lender. Use Lendgo to see what offers you qualify for and easily compare providers to gain negotiating power.
If you are interested in a refinance, it's best to make your move before the end of the second quarter of 2021, as that will help you save the most!