Home Refinance Applications Soar
The Mortgage Bankers Association reports that home refinance applications jumped 17% in seven days during the week ending May 21, 2010. The organization says that the leap is largely a result of continuing decreases in interest rates, which have fallen to an average of 4.80% for a 30-year, fixed-rate mortgage (FRM). Those are the lowest mortgage rates this year, and extremely close to the all-time low seen last year.
Freddie Mac agrees that this week's are the best mortgage rates of 2010, although it says that the average for a 30-year FRM during week end May 27, 2010 was even lower, at 4.78%.
Best Mortgages Rates Still to Come?
As reported in the last edition of these columns, the Wall Street Journal recently cited analysts who believe that the best mortgage rates are still to come. They think that 30-year FRMs could be averaging 4.5% later this summer.
And that raises a question for everyone who is thinking of buying a home or refinancing: Should I act now, or take a chance on those analysts being right, and mortgage loan rates dropping even further?
Unfortunately, that's a question that even the best mortgage lenders can't answer. To start with, many of those analysts that the Journal quoted are the very same "experts" who believed that what turned out to be the subprime bubble was a good thing. Anything they say should be taken with industrial quantities of sodium chloride.
Mortgage Loans and Market Volatility
Another reason for skepticism is the exceptional volatility of the markets that determine mortgage loan rates. Currently, the received wisdom is that these rates are low because investors see the U.S. dollar and treasury bonds as safe havens while economic storms ravage the eurozone.
But that can change in the blinking of an eye. So on May 28, 2010, just a few days after the Journal piece--and a few hours after similar analyses elsewhere--the Financial Times ran a report under the headline "Dollar suffers as risk appetite bounces back" that began:
The dollar and the yen remained under pressure on Friday as a rally on global equity markets weighed on haven demand for both currencies. Following a sharp rally in stocks on Thursday, world equities retained their poise on Friday amid growing sentiment that the sell-off inspired by the eurozone sovereign debt crisis was overdone.
Worth the Gamble? Compare Mortgage Rates Now
Whether you choose to take a chance on current mortgage rates dropping even further will probably depend more on whether you're one of nature's gamblers than whether you have faith in analysts' forecasts.
But bear in mind one factor. According to the shoprate mortgage calculator, you'll save about $25 a month if you lock in your $150,000 mortgage loan at 4.5 percent instead of 4.78 percent. Is it really worth throwing the dice for such a small return?
Whatever you decide, you should closely monitor the market during this turbulent time, and regularly compare mortgage rates here.