If you’re considering refinancing, do it now: experts expect refinancing rates to rise

The golden age ofrefinancingAccording to experts, the end of it may be approaching. Over the past two years, a handful of factors — including rising home prices, COVID-19 migration and low interest rates — have combined to create a near-ideal environment for homeowners looking to refinance, such as Mortgage interest below 2% for the first time.

Although rates have recovered slightly since then, they remain remarkably, historically low. But that could soon change, say a chorus of economists, real estate experts and mortgage sellers. “If you’re considering refinancing, do it now,” said Kimber White, former media president of the…National Association of Mortgage Brokers.

As the Federal Reserve considers cutting some stimulus programs and the US Treasury moves closer to the debt ceiling, several economic trends are converging to rattle the market. The bottom line: If your mortgage rate is 3.5% or higher, this remains a very good time to lock in an always-low refinancing rate.

“Our forecast is that rates will gradually rise over the next year, and we can expect a general slowdown in refinancing activity as a result,” said Joel Kan, economics and industry forecaster at the United Nations. Mortgage Bankers Association. The MBA predicts that by the end of 2022, the 30-year fixed-rate mortgage will rise to 4%.

Of course, no one knows for sure what will happen. But here’s a look at some of the factors that can drive up mortgage rates — and why now is a great time to move forward with refinancing.

Flirting with the debt ceiling

The biggest joker is the debt ceiling. If Congress Doesn’t Raise or Suspend the Debt Ceiling — and soon — the US Treasury Department is expected to default sometime between Oct. 15 and Nov. 4, according to a recent analysis by theBipartisan Policy Center. We don’t know exactly what will happen if the US defaults — it would be an unprecedented event — but it would almost certainly drive up interest rates. “If they don’t lift the debt ceiling, it will crash the stock market and everything else,” White said. “That can certainly have consequences for mortgage rates and our housing market.”

Brendan McKay, chair of broker advocacy at theAssociation of Independent Mortgage Experts, agrees. “If the economy is bad, the stock market goes down,” he explains. “This causes people to move their money from the market to bonds, bond prices go up and interest rates fall. But if it’s also a government problem, that would probably cause both bonds and stocks to fall, causing interest rates to fall.” go up.”

The Fed begins to wind down

To counter the economic impact of the COVID-19 pandemic, the Fed cut interest rates and accelerated purchases of government-backed bonds. Since then, the FedBuy $40 Billion of mortgage-backed bonds per month. But as the US economy continues to recover, the Fed has indicated that it will “soon” phase out its investment in mortgage-backed securities. In September, President Jerome Powell . said indicatedthat the Fed could start winding down around the time of itsnext meeting in Nov.

“If the Fed starts winding down, it will most likely push interest rates up, unless there’s sudden pressure from the secondary market – Wall Street, in fact – to buy mortgage-backed securities at these low interest rates,” McKay said.

While no official decision has been made, Chairman Powell also indicated that Fed members are united on the decision to complete the winding down efforts by mid-2022 – as long as the economic recovery remains on track. The Fed is also expected to raise interest rates around late 2022 or early 2023, according to Chairman Powell’s speech at the committee hearing.

Inflation drives prices up

In September, the consumer price index for US goods and serviceswas 5.3% higher than a year earlier— the strongest increase since the US housing market crash in 2008. In its JulytestimonyBefore the House Financial Services Committee, Powell acknowledged that inflation has risen to unexpectedly high levels, but reassured lawmakers that the Fed is monitoring the situation “night and day.” While he reiterated that rate hikes were not on the table at the time, that could change.

Where the mortgage interest is going

The confluence of factors outlined above suggests that mortgage rates are about to rise. And while it will likely be a slow, steady and not always linear climb, experts expect an overall increase in the coming months. Waiting too long to grab the lowest rate can cost you in the long run.

“If someone waits to refinance and rates go up, the natural human tendency is to chase the lower rates — it’s the gambler’s misconception and everyone is prone to it,” McKay said.

If you haven’t refinanced your mortgage yet because you don’t know how to do it, here are: there are plenty of resources to help you through it.

“If refinancing makes financial sense to anyone, yes, then they should do it today, they should do it tomorrow, they should do it immediately,” McKay said. “Not because I think interest rates will go up or down, but because it makes financial sense.”