American homeowners yet to refinance to a cheap mortgage deal are being urged to act sooner rather than later after mortgage rates jumped higher on the news of a potential coronavirus vaccine and post-election economic optimism. According to the latest Bankrate national survey of lenders (opens in new tab), the average cost of a 30-year fixed-rate mortgage increased to 3.12% from last week’s 3.04%, while typical 15-year fixed rates edged 3 basis points higher to 2.5%.
Mortgage rates have been at or near historic lows ever since the coronavirus recession began earlier this year, with the best refinance mortgage companies (opens in new tab) being inundated with loan applications from homebuyers looking to take advantage as a result. However, amid optimism about the presidential election, the discovery of a possible COVID-19 inoculation, and an improving labor market, stocks have soared higher in the past week, and taken mortgage rates with them.
Will mortgage rates rise further?
In a poll of mortgage experts, 92% said they expect a further uptick in the week ahead, mainly on the basis of the vaccine announcement, and the benefits this would have for the US economy. Buoyed by the news, the 10-year Treasury yield - a key indicator for mortgage rates - increased to 0.95% on November 9, a level not seen since March last year.
“The vaccine and better treatments give you a pathway to get the 10-year yield above 1 percent and higher in 2021 as the economy works its way back to normal,” says Logan Mohtashami, housing analyst at HousingWire (opens in new tab). “Mortgage rates should follow, which is great for the United States of America.”
Who it might not be so great for is homeowners that are still to arrange a refinance mortgage. Recent research suggested that seven million American mortgage borrowers could save $300 on their monthly mortgage payment (opens in new tab) if they refinanced their home loan to a new deal from the best mortgage lenders (opens in new tab). However, as mortgage rates start to rise, the number for whom switching mortgage deals will be beneficial will begin to drop too.
Should you refinance now?
Despite the rise in mortgage rates seen in the past week, rates have been so low that borrowers who have yet to make their refinance move will still have a lot to gain.
“Rates have bumped up due to the ‘glass half full’ outlook on a vaccine and the economy, but - and this is worth emphasizing - rates are still really, really low,” said (opens in new tab) Greg McBride, CFA, chief financial analyst at Bankrate. “No need to freak out, thinking you’ve missed the refinancing window. You haven’t.”
Of course, there’s the chance that mortgage costs could start to fall again, but with most indicators suggesting rates will continue to travel in the opposite direction, it isn’t a risk worth taking. The key is finding out how to refinance your mortgage (opens in new tab) and acting swiftly now, before rates have the opportunity to climb higher.
Getting prepared to refinance your mortgage
If you’re not sure where to begin, or have been putting your search off because you're too busy to track down a new mortgage deal, a comparison site such as Mortgage.net (opens in new tab) is the ideal place to start. You only need to share your details once and mortgage companies will approach you with the rates and terms that you’re eligible for. Compare the best offers with your current mortgage plan and what you’re paying already, and you’ll quickly discover whether a switch is worth making.
If there is a new mortgage that works out favorably for you, preparing everything that a new lender will want to see is the next step. This means finding the documents for your current mortgage, and arranging whatever you need to prove your income, tax (opens in new tab) situation and employment. Mortgage providers also usually want to know about your savings and any investments you might have through the best online stock trading (opens in new tab) platforms, as well as details of what you owe on the best personal loans (opens in new tab) and credit cards (opens in new tab).
Making sure your credit rating is in the best possible standing that it can be is a must too, and something that the best credit repair services (opens in new tab) can help you with. However, get everything in line, and your refinance mortgage could be completed in no time at all.