During a recent Inside Real Estate podcast interview with mortgage expert Barry Habib, he talked about why now is the time to refinance. He warned that waiting for rates to drop even further is a gamble because there is never total certainty in where the market is going. Which is why refinancing now is so important.
To help quantify how many could benefit from refinancing, he referenced a staggering statistic. According to the May 2019 Black Knight Mortgage Monitor, about 8.2 million homeowners with mortgages could benefit from and would likely qualify for a refinance. This is the largest this refinance population has been since late 2016.
As mortgage rates drop the pool of homeowners who would benefit from refinancing continues to expand. The candidates for refinancing grew 40% in June vs. May, growing 1.5 million candidates and could continue to climb.
When it comes to refinancing your mortgage, there are a variety of options to explore. Additionally, the decision to do so has to make financial sense for your situation. When we get asked, “when should I consider refinancing?” our answer is always dependent upon rates and some math associated with the particular home buyer’s situation. (See video below for tips.)
So are rates expected to continue to drop? It depends on who you ask. The reality of the matter is that not many predicted mortgage rates would be this low right now. Many were thinking we would be in the 7% range, so the current market situation is extremely beneficial to borrowers.
Some are throwing out the potential for a 2% mortgage interest rate as a result of a potential recession that may be looming. Recessions are important to track because during a recession investors often move money into safer investments and mortgage bonds are considered one of the safest. With more demand for these mortgage bonds, rates could continue to drop, but all of this is predicated on a recession.
On the other hand, another point of view exists that doesn’t see rates dropping and they may actually increase. According to Peter Warden at The Mortgage Reports, “there’s scope for good economic news that could see them rise, possibly sharply.” Mortgage rates can be very volatile, and like any other investment, there is always the potential for rapid, unforeseen changes.
The bottom line is that rates are low, and many homeowners should at the very least consider refinancing. If you’re floating and waiting for that 2% interest rate, you may have more to lose by waiting should rates rise. At the very least, if you’re mortgage is at 4.5% or higher, refinancing is worth a conversation. Contact us if you would like to discuss your situation.