With mortgage rates at record lows, many are asking: How low can they go? And should I refinance — again?
This week rates fell to levels that many people thought they would never see. Freddie Mac (the Federal Home Loan Mortgage Corp.) reported that the average rate on a 30-year-fixed-rate loan was 4.44 percent, with 0.7 of a point in prepaid interest. (One point equals 1 percent of the loan amount.) Loans fixed for 15 years also hit a new record, 3.92 percent, with 0.6 of a point, on average. At Metro Credit Union, rates are below the national average.
Frank Nothaft, Freddie Mac’s chief economist, said in a recent report: “The ability to lock in a principal and interest payment at below 5 percent for 30 years is rare enough. The fact that a 30-year fixed-rate mortgage can be obtained for 4.5 percent or a 15-year mortgage for 4 percent is an amazing opportunity for borrowers.”
Although home values have declined nationally, homeowners in the Boston area should not assume that they won’t qualify for a new loan. Until you go through the application process, you don’t really know. Most people will be pleasantly surprised to find out how much they will save.
Refinancing now accounts for 78 percent of all loan applications nationwide, the Mortgage Bankers Association reported this week. And many homeowners are taking shorter-term loans that carry a lower interest rate so they may build equity faster. That’s a particularly attractive option for people who hope to pay off their mortgage before retirement.
Some borrowers are refinancing out of 30-year fixed-rate loans into new fixed-rate loans lasting 15 or 20 years. Others are more focused on lowering their monthly payments.
Sometimes switching to a shorter-term loan might increase your the monthly payment, but you can save a lot of money over the duration of the loan. Using a loan-comparison calculator at metrocu.org, you can see the difference and test your options.
Might rates go even lower? Perhaps, but probably not by much, according to Celia Chen, senior director at Moody’s Analytics. “I don’t think they’re going to fall much further; they’re at a record right now,” she said in an interview this week with the Washington Post.
And though it’s remarkable to note how many weeks in a row that mortgage rates tracked by Freddie Mac have marked new records (seven times in the past eight weeks), the week-to-week changes have been tiny, usually only one-hundredth or two-hundredth of a percentage point at a time. This may be the best time ever to refinance. To check Metro’s current rates, visit metrocu.org.