A number of high-profile prognosticators have said mortgage rates will rise 2013.
For today’s home buyers and rate shoppers, their predictions may be a signal to “buy now”. The longer you wait, they say, the more your should expect to pay on your mortgage.
MBA : Rates To Climb One Percentage Point
Freddie Mac’s weekly mortgage rate survey puts the average 30-year fixed rate mortgage rate nationwide at 3.32% this week — an ultra-low figure and just 0.01 percentage points higher than the all-time 30-year fixed rate low set in late-November.
According to the Mortgage Bankers Association (MBA), however, these low rates won’t last.
In its annual mortgage rate forecast, the MBA projects that the 30-year fixed will rise to 4.40% within the next 12 months. This is more than an entire percentage point higher than today’s mortgage rates; a shift that would severely damage buyer purchasing power, and that may end the longest Refi Boom in recent history.
To understand the magnitude of 4.40% mortgage rates as compared to today’s 3.32%, consider a home buyer in the San Francisco, California borrowing at the local jumbo loan limit of $625,500.
- In 2012, at 3.32 percent, the mortgage payment is $2,746
- In 2013, at 4.40 percent, the mortgage payment is $3,132, a $386 increase
Or, presented in reverse, to maintain a monthly mortgage payment of $2,746, the most that the Bay Area borrower could borrow from the bank is $548,400.
This represents a hefty 12.4% purchasing power reduction and suggests that buyers should lock their rates now.
Rising Rates Fuel Refinance Activity
Mortgage rates have already started to climb, as this week’s Freddie Mac survey will show. It appears that homeowners have taken notice.
As rates start to rise from their all-time lows, the MBA reports that, for the week ending December 7, 2012, mortgage applications increased 6.2 percent on a week-over-week basis.
Purchase mortgage applications accounted for a small percentage of the increase. The bulk, however, was refinance-related. The trade group’s Refinance Index rose 8 percent as compared to the week prior and is now at its highest point since mid-October of this year.
Refinance applications accounted for 84 percent of last week’s mortgage activity.
HARP Loans Get Big Year-End Boost
It’s also noteworthy that demand for the government’s Home Affordable Refinance Program (HARP) remains strong. HARP mortgages accounted for close to 1-in-4 refinances during Q3 2012 and demand for the “underwater refinance” is rising into 2013.
Last week, HARP was requested in 29% of refinance applications and the program is expected to help more than 1,000,000 homeowners in 2012.
HARP is available to homeowners with mortgages backed by Fannie Mae or Freddie Mac; with a 12-month perfect payment history; and with a mortgage securitized on or before May 31, 2009. For homeowners with FHA-insured mortgages, a similar underwater loan-type is the FHA Streamline Refinance.
Get Your Rates While Rates Are Still Low
Mortgage rates have climbed since the Federal Reserve’s mid-December meeting but still remain near all-time lows. Into 2013, however, rates are expected to climb. Therefore, if you’ve been thinking about getting starting with a refinance, now would be a great time to do it.
Mortgage rates often rise suddenly and unexpectedly. Get ahead of the changes and see what a mortgage refinance can do for you.