Many homeowners are asking themselves if they should refinance or not. Lets take a moment to understand why the interest rates are so low and why they will remain low for some time and lets try to predict how low they will go.
The feds recently lowered their rate to a historical low. Fact!
The feds will keep the rate low for at least 6-8 months. Prediction!
The feds were hoping to make loans affordable. Fact!
This has worked well in getting people to refinance. So far fact!
The mortage rates on the 30 yr fixed has come down. Fact!
The rates will keep going down, under the 5 % mark on the 30 yr. Prediction
The feds tried to start something and so far it seems like it has worked, the fear over the variable rates has taken over even the smartest people, and everyone is trying to get out of those adjustable rate mortgages with the fear that the market will keep declining and this might be their only chance to refinance.
With fear, as always, the volume of things multiplies and therefore the volume for refinance do as well, with everyone trying to refinance, and even in some cases give cash out of pocket to qualify, this gives an opportunity to banks to push the lending piece forward, take bad loans off their books and creates income as well for them through closing costs and points.
So we are now faced with the question: is this the right time?
If you ask me, I say wait a few more weeks but keep a close eye on the rates and the different lenders, I would also look at the 5/1 adjustable rate mortgage, it is a great product and the market will adjust in 5 years. But again, you can play it safe and stick to the 30 yr, but I am pretty confident that it will drop under 5% with no point very soon.