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August 10th, 2011

Record-low mortgage rates bring new refi opportunities

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falling ratesMortgage fall to record lows

Last week, the overall average rate for 30-year fixed-rate mortgages (conforming, expanded conforming and jumbo mortgages) hit a 2011 low, dropping to 4.65 percent.

As of the close of business last Friday, the 30-year conforming fixed-rate mortgage rang in at 4.41 percent, also a record low in 2011.

Take advantage of these record-low mortgage rates

Aside from the last few days, mortgage rates haven’t fallen under 4.50 percent since last November. These renewed low rates represent another fantastic opportunity for borrowers to refinance.

For those of you who missed out refinancing last year when mortgage rates fell to similar levels now have a renewed opportunity for savings. A well-executed refinance can lower your interest rate, lower your monthly payment and help you pay off your home more quickly.

Should you refinance?

Refinancing to an interest rate just 1 percent lower than the rate you currently have can provide big savings, making your efforts extremely worthwhile.

For example, let’s say you have a mortgage balance of $200,000 on a 30-year fixed-rate mortgage. With a mortgage rate of 5.5 percent, your monthly payment is $1,136. If your rate drops to 4.5 percent, your monthly payment shrinks to $1,013, a savings of $123 per month.

Calculate your monthly mortgage payment

Act now, mortgage rates should already be rising

You’ve probably heard us say before that “more people get burned trying to time the bottom of the mortgage market than the top of the stock market.”

Well fear not, because if you lock in a rate now, you’ve timed the bottom of the mortgage market quite perfectly.

In more typical circumstances, if the economy wasn’t in such bad shape and investor confidence wasn’t as low, the downgrade of U.S. debt, and subsequently the downgrade of Fannie Mae and Freddie Mac, would have caused mortgage rates to rise immediately. In fact, they did.

However, with renewed fears of a double-dip recession, fearful investors poured their money into U.S. Treasuries–a reasonable, if imperfect indicator for fixed-rate mortgages–lowering the yields on that debt, pulling mortgage rates down along with it.

All that money that poured into Treasuries (lowering the yield, lowering mortgage rates) more than made up for the increase caused by the downgrade.

Market analysts warn that low rates can’t last

Despite all the turbulence over the last week or so, experts warn that the rock-bottom mortgage rates won’t last. Here are three reasons why mortgage rates could rise in the days and weeks ahead:

1. Economic improvement: Expectations have been so low for so long that even a minor improvement in certain economic reports could really improve the nation’s economic outlook, fostering higher mortgage rates.

2. Another Fed program: HSH.com contributing author and loan officer Dan Green explained to MarketWatch’s Amy Hoak, that if the Fed decides to stimulate the economy with another quantitative easing program, it could spell upward movement for mortgage rates.

3. Changes in investment strategies: As we explained above, investors flocked to U.S. Treasuries as a safe place to park their cash. But if investors decide to pull their cash out of Treasuries and back into stocks, we could also see mortgage rates increase.

Borrowers have been presented with another incredible, money-saving opportunity, and it shouldn’t be wasted.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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