Mortgage Rates Start to Climb: Should You Refinance?

The news that a highly effective COVID-19 vaccine might soon be available could have an unexpected downside for home shoppers.

Sam Khater, chief economist for Freddie Mac, recently told Money magazine that mortgage rates now are rising in the wake of reports that pharmaceutical company Pfizer has developed a COVID-19 vaccine that could be up to 90% effective in protecting people from the disease caused by the coronavirus.

So far, mortgage rates are up modestly — just 0.06% from recent record lows. But even that slight uptick is a warning sign that rates could start rising at any point.

In fact, Mike Fratantoni, chief economist at the Mortgage Bankers Association, recently forecast that the average rate on a 30-year mortgage will rise to 3.5% by the end of next year.

Since rates still remain low today — they were around 1% higher a year ago — is this the time to lock in a rate on a mortgage?

As always, the answer depends on the borrower.

Should you refinance?

While refinancing to a lower mortgage rate might seem like a no-brainer, you need to weigh other factors before determining if the move makes sense for you. As we have written:
“Refinancing to a lower rate lowers a monthly mortgage payment. But it only makes sense if the month-to-month savings exceed the cost of refinancing. In short, don’t do it unless you’ll stay in the home until you’ve saved more from the lower rate than you paid in refinancing fees.”
However, for millions of other homeowners, refinancing is likely a wise decision.

In fact, mortgage data firm Black Knight recently reported that as of July, 7.6 million Americans had 30-year mortgages with fixed rates of 5% or higher. Another 17.6 million such homeowners had rates of 4% to 4.875% at that time.

For more on the ins and outs of getting a new home loan amid rising coronavirus infections, check out “6 Tips for Refinancing Your Mortgage During the Pandemic.”

If running the numbers reveals that a refinance is the right move for you — or if you are simply curious as to what kind of rate you could qualify for these days — stop by Money Talks News’ Solutions Center and search for the best mortgage rates.