The Federal Reserve may be signaling that they won’t continue to attempt to keep mortgage interest rates at their lowest point. A VA refinance loan at today’s rising rates may make sense for some eligible borrowers.
Remember in fall of 2012 when rates hit rock bottom? If only some of us had the foresight then to lock in and refinance. Interest rates have been rising, and a VA refinance loan may make more sense now than sometime in the future. The fact is, the higher interest rates go, the more a new mortgage will cost. An increase of just one-half of a percentage point from 4.0% to 4.5% can add about $58 to your monthly principal and interest payment on a 30-year loan of $200,000. Over time, you’ll pay nearly $20,000 more in interest with that half-point difference. And, a .5% increase is not an unrealistic expectation as far as interest rates are concerned.
According to the Weekly Primary Mortgage Market Survey® (PMMS®) put out by Freddie Mac, the all-time record weekly average low for the 30-year fixed mortgage was 3.31% set on November 21, 2012. Since then, rates have been on the move. On January 10, 2013 weekly rates averaged 3.40%. A little over six months later, rates jumped more than a percentage point. On June 27, 2013 the weekly average rate settled at 4.46%.
How Long Can Historically Low Rates Last?
Freddie Mac started keeping track of weekly average interest rates in 1971. Considering that weekly average rates hovered above 15% in the early 1980s, today’s mortgage interest rates are still in the historically low range. Still, VA-eligible borrowers may want to refinance sooner than later. In his address to the Federal Open Market Committee (FOMC), Federal Reserve Chairman, Ben Bernanke, indicated that the government’s practice of purchasing mortgage securities will likely stop altogether by late 2014. Many credit the stability associated with these purchases, in part, for the low mortgage rates and rising home prices. Many have attributed the recent rise in interest rates to the expectation that the Federal Reserve will end or scale back this program earlier than previously expected. If the purchases cease, mortgage rates may be more tied to the traditional ebb and flow with the bond market. Only time, and more Freddie Mac tracking, will tell if mortgage rates will continue to go up.
Seizing this moment may be a wise decision for many on the fence about refinancing their mortgages. In addition to competitively low interest rates in line with today’s national average, VA refinance loans have many things going for them, including:
- Up to 100% Loan-to-Value (LTV)
- No monthly mortgage insurance premiums
- Relaxed qualifying compared to conventional standards
- Streamline rate reduction program for current qualified VA borrowers
When you add a competitively low interest rate to the mix, a VA refinance loan can be a great option for those who qualify.
Borrowers Who Lock in Now May Get the Lowest Rate for Years to Come
Due to all the hype about “historic lows”, some may have acquired a false sense of security that rates will stay low. Others may not follow rates that closely and may not be aware of the current rising trend documented by Freddie Mac. Regardless of your knowledge of current events, a VA refinance is worth looking into in today’s market. While nobody knows what the future holds for interest rates, it’s possible you could just lock in the lowest rate for years to come. You may look back and say, “Remember when rates were at 4.5%? Those were the days!”
For additional information contact a VA loan officer at an approved lender.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender