Mortgage rates have been so low for so long that it’s hard to believe there are any homeowners left who haven’t refinanced their mortgages. But there are still people who can benefit, and conditions are still strong for refinancing. Below are some predictions for 2015 and how the refinancing market will shape up.
Rates Will Remain Low, At Least For A While
Mortgage rates moved back below 4 percent in the latter stages of 2014 and are expected to stay around that level into at least the first half of 2015. For homeowners who still have a mortgage rate that’s around 4 1/2 to 5 percent, that makes it worth it to refinance. However, because the Federal Reserve has stopped buying mortgage-backed securities, rates are likely to go up at some point. Mortgage rates also could rise if, as expected, the Fed starts raising short-term interest rates, which could happen as early as spring.
Refinancing Activity Should Increase
As mortgage rates have dropped back below 4 percent and should remain there for at least a few months, it should spur refinancing activity, at least in the first half of the year. An improving economy and improving housing market also could help the refinancing trend, because people are more likely to refinance when they have more equity in their homes and when they feel more stable about their overall financial situation. Experts are predicting as much as a 7 percent increase in mortgage refinancing volume.
Fannie, Freddie Change May Boost Refinancing
Fannie Mae and Freddie Mac announced on December 8 that they will allow down payments on conventional loans to be as low as 3 percent for first-time home buyers. A part of that announcement that was less-touted, however, is that Fannie and Freddie will also allow homeowners to refinance with as little as 3 percent equity in their homes to help cover closing costs. The loans will only be available to well-qualified buyers, but it should help boost refinancing somewhat. On a home worth $200,000, the difference between 5 percent equity and 3 percent equity is $4,000, which should cover closing costs in most situations.
Don’t Wait To Refinance
While mortgage rates are low, they aren’t likely to stay there for long. If you have a rate that’s higher than current rates or want to refinance into a shorter term, call your trusted Real Estate or Mortgage professional right away.