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Refinance Now? Three Reasons Why the Answer Is Yes

Posted by  on Feb 08, 2010
 

1. Lowest Mortgage Rates

Right now, Americans are seeing the lowest mortgage rates ever. But if you're putting off refinancing because you're hoping they'll go even lower, you could be in for a long wait.

The latest Mortgage Bankers Association (MBA) forecast says: "Fixed mortgage rates are expected to average five percent in the fourth quarter of 2009, and increase to 5.6 percent by the end of 2010."

And, although economists see lots of reasons for mortgage rates to stay in that range for a while, the MBA acknowledges that nobody knows for sure. What seems likely is that the pressure will be relentlessly upwards.

If you're thinking of refinancing (or buying a home) just about all the advice seems to be to compare mortgage rates now.

2. A Fragile Future Mortgage Market

Recent pieces in The Wall Street Journal and Bloomberg both reported mortgage experts are forecasting a double-dip in the mortgage market. The MBA currently expects that mortgage originations this year will come in at $1.9 trillion, but economists at JPMorgan and Franklin American Mortgage expect the figure to drop to $1.5 trillion in 2010.

There are two main factors behind their pessimism. First, there's a widespread expectation that unemployment will continue to rise through the first half of 2010. That has a continuing impact on consumer confidence and spending.

And, secondly, the Federal Reserve is currently buying mortgage-backed securities. When it stops--as it must--there is likely to be more upward pressure on today's mortgage rates, which will drive down volume in the market.

In particular, the MBA expects refinance deals to suffer. It predicts: "Refinance activity will likely decrease in 2010 to about $745 billion as mortgage rates increase."

And it's talking about a substantial fall. That $745 billion is down from $1.245 trillion in 2009.

3. Residential Real Estate Prices Unpredictable

If you want the best refinance deal, it's important that the value of your home is as high as possible. Here, the news is better. The consensus is that home prices will begin to rebound in 2010, although possibly slowly, and only in some price brackets.

Worse, some states will fare much better than others. In fact, if your home is in an area with a highly depressed property market, then you could even see its value continue to decline.

All this adds up to one thing. If you're likely to want to refinance any time before 2011, you should be exploring your options NOW.

 

 

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