Evaluate the Benefits of Refinancing your Mortgage Before Rates Increase

By Cal Haupt, President and CEO of Southeast Mortgage

 For most of 2012, the average rate on a 30-year fixed mortgage has been falling, reaching new lows in each of the past four weeks. Last week the streak ended and rates rose from 3.49% to 3.55% for 30-year mortgages and increased from 2.80% to 2.83% for 15-year fixed mortgages. I believe that the music is slowing down for the bias towards lower and lower interest rates. If refinancing makes sense for you and your family, now may be the time to take advantage of the events that brought us to these historic lows.

Mortgage rates have been as low as they are for a couple big reasons. Uncertainty about how Europe would handle their debt crisis and our own weakened economy drove investors to buy more Treasury securities. These investments are considered safe, and as the demand for them rises, the yield falls.

The rise in mortgage rates can be attributed to actions taken across the Atlantic, and the drought that’s burning up the breadbasket of the United States. In Europe, Mario Draghi, president of the European Central Bank, outlined a bargain that is taking shape between central bankers and politicians in Europe’s financially troubled countries. The ECB will make outright purchases of their debt under certain conditions in order to maintain price stability and lower the high borrowing rates hurting the European Union’s indebted governments. Draghi’s announcement added upward pressure on Treasury yields, and therefore mortgage rates.

 Dismayed farmers display useless, dried out ears of corn to reporters. Soy suffers, too, as the drought continues. High corn and soy prices will work through the system and raise all food prices. The USDA forecasts food prices rising between 2.5 and 3.5 percent. Food inflation, core inflation from U.S. stimulus activities, along with the ECB’s actions, may be the catalyst towards higher mortgage rates.

J.D. Crowe, Senior Vice President at Southeast Mortgage, wrote about rates, and his client’s decision to refinance, in a previous Thought Leadership column and gave an example of how homeowners can save themselves thousands of dollars by refinancing. With 15-year fixed mortgage rates so low (but potentially rising soon) looking into your situation to determine if you should refinance is a great idea.

When considering the refinance of your mortgage, be sure you are working with a Licensed Mortgage Originator, MLO.  Check http://www.nmlsconsumeraccess.org/  and your State Department of Banking and Finance to ensure the MLO has passed the Federal and State competency exams like all MLOs at Southeast Mortgage.  The benefits must be accurately determined to ensure you make the best decision for you and your family.

The end to bias down in Mortgage Rates - Cal Haupt

With the euro zone issues compounding the post recessionary recovery, the flight to safety provided a bias down in US mortgage rates.

Now ECB President, Mario Draghi, has potentially put the floor in with their mandate to maintain price stability.  Mr. Draghi has made it very clear the euro crisis would not destroy the currency and the ECB would make outright purchases of debt to solidify their objective.

For those that monitor rates and consumers waiting for lower rates, you may have noticed the tick up.  Food inflation due to the heat, core inflation from the US stimulus activities, and the floor put in by Mr. Draghi and the ECB may be the catalyst for a trough in mortgage rates and the turn north.



In my opinion, the music is slowing down for the bottom of the bias down in mortgage rates.  If the benefit to refinancing makes sense for your family, now may be the time to take advantage of the events that got us to this historic low.

Cal Haupt

Chief Executive Officer, Southeast Mortgage

www.southeastmortgage.com

770-279-0222