Refinancing: What Are You Waiting For?

Last week was A WEEK, to be sure. The whole mortgage industry is cautiously optimistic to see some relief on interest rates after a jobs report that showed unemployment rates at the highest since December of 2020 As we know, bad news is frequently good news when it comes to mortgage rates, and we saw mortgage rates drop in response. The news cycle took this and ran, and I was fortunate enough to have several clients to reach out to with refinance options. Let’s start with one real fact- we are not quite as low as last September, and the trends of the last few years don’t really support that we are headed back to 2020/2021 rates.

Mortgage rates: September 2021 through September 2026

If you bought in 2024, and refinanced last September when rates last dipped, you would have come out well ahead even if we do continue to see rates going down. Remember that there is a cost of waiting and paying the higher interest rate, which is why I typically price a refinance to break even in the shorter term, rather than with a lot of cost that only benefits you in 2+ years. Taking an option that covers your costs within a few months and allows you to lock your rate in at current levels gives you a hedge against rates ticking back up, as they have over the last few years, and means that if they continue to go down, you can repeat the process and still come out ahead.

Interest rate expectations vs reality: 2020-present

Even the experts have a difficult time predicting interest rates, as you can see here with the expectations on fed funds rates. Keep in mind that the people setting mortgage pricing are already assuming market conditions for 30-60 days in the future, since your rate lock is offered based off what they project the market will be after your loan closes when it is sold, so if everything happens as expected, that means no change to rates. The unexpected news is what changes your available mortgage rate, and that’s, well, unexpected.