Mortgage

The Huge Debate on Mortgage Charges: Will Curiosity Charges Rise or Fall?

Will the lowest mortgage rates ever hold?

Mortgage rates have collapsed. What can you say?

The average price for a 30-year fixed-rate mortgage was just 2.98% last week.

It's another record low – the lowest average since 1971, the year Freddie Mac first published weekly numbers.

The big question for home buyers and refinancers is: How long will the lowest mortgage rates last?

Find and lock a low rate (July 21, 2020)

Today's record low mortgage rates

Mortgage rates are in a ditch. Mortgage prices have continued to fall since 1981. Not every week or month, but the general trend is clear.

As a borrower, consider the following when looking at today's mortgage rates:

The prices are actually lower than the headlines suggest. Freddie Mac's weekly numbers are a lagging indicator. Mortgages at the price of 2.5% were available to the largest borrowers in May
The monthly costs are lower. Compared to November 2018, when interest rates were over 4%, a $ 200,000 mortgage is now $ 225 less a month. Use our Mortgage calculator to compare your current tariff with new funding
Houses are cheaper when prices go down. However, this increases the pool of potential buyers and tends to drive prices up. According to the National Association of Realtors (NAR), property prices in May rose 2.3% year over year.
Low rates change the blocking strategies. If you think interest rates will rise in the next few weeks or months, you should set your interest rate before closing. If you think interest rates will continue to fall, it's best to let interest rates float until settlement

Of course, "historic mortgage rates" have been on the news for months.

So it's easy to believe that they're not going anywhere – that we'll sit comfortably at 3% forever. (Or at least for the foreseeable future.)

But can the series really last?

Mortgage rates have been on a downward trend for almost 40 years. If there was a top in 1981, there must surely be a bottom – a moment when mortgage rates begin to rise in general.

Many think that the turning point is coming soon.

The case to come for higher mortgage rates

There are three main ones Arguments for rising mortgage rates in the near future:

Increased credit demand – – With such low interest rates, lenders are overwhelmed with applications. In early July, the Mortgage Bankers Association reported that refinancing applications rose 111% while purchase credit applications increased 33%. What happens when the demand increases? Mortgage rates are rising
An upcoming presidential election – It is difficult to predict what will happen in the November elections, let alone how this will affect the mortgage industry. The 2016 elections were followed by an almost immediate rise in interest rates. What is certain is that investors will monitor the situation closely in the coming months. If investors predict more economic stability in the future, they will leave the mortgage market and interest rates will rise
Pending foreclosures due to COVID-19 – Earlier this month, ATTOM Data Solutions reported that enforcement applications were at 15-year lows. For mortgage investors, such news means little risk and therefore the willingness to lend at low mortgage rates. However, there are two problems with these numbers. First, government protection from foreclosures, which kept filings low during COVID-19, will eventually end. Second, enforcement numbers are delayed by at least 30 days because it takes some time for the submissions to be deleted. Therefore, further foreclosures are likely to be expected in the future – and with it a higher risk for lenders and higher interest rates

These are all very real perspectives. We saw a surge in mortgage rates earlier this year when lenders were overwhelmed by the volume and had to stem the tide.

And even experts cannot tell what will happen in the post-COVID economy.

Our advice: Heed these warnings when you are ready to buy or refinance a home.

The prices are already at the lowest level ever. More drops are likely to be incremental at best, and if you wait, you may miss your window.

Check your new tariff (July 21, 2020)

The case will come for lower mortgage rates

Maybe mortgage rates won't go up. Due to the COVID-19 economy, there will be enormous uncertainty in the future.

As the argument states, interest rates were low and decreased before the virus appeared. Why shouldn't they keep falling?

The global supply of capital significantly exceeds demand. Investors in many countries invest with negative interest rates. Not only low rates, but also actual negative rates below 0%.

Interest rates were low and decreased before the virus appeared. Why shouldn't they keep falling?

As we wrote last summer:

“The same factors that led to 3% funding are likely to lead us into the 2% mortgage world.

"There is a continuing imbalance between cash investors and those who want to borrow. Cash is everywhere and more of it is likely to come to a mortgage lender near you."

There is too much supply and too little demand, argues for lower rates.

And nothing will change with a view to the future. From this perspective, interest rates are still declining.

Our advice: As we said above, it may not be worth risking today's extremely low interest rates in hopes of something slightly lower. If you are ready to buy or refinance, now may be the time to do so.

However, if your loan plans are a little further away, you don't have to move before you're ready.

The corona virus is the main force that keeps rates where they are now. And unfortunately that won't go away so quickly. So you have some time.

Your next step

Your next step depends on where you are in your financing process.

For those who are willing to buy or refinish a home, it may make sense to take advantage of the prices we see today.

And remember, just because some lenders offer record rates doesn't mean that they are all. So look around to find the best deal for you.

Check your new tariff (July 21, 2020)

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