August 12, 2021
What do you need to know when mortgage rates start to climb? That depends greatly on whether you are interested in buying, refinancing, or even building a home from the ground up.
Why?
Because there are situational concerns that may affect your decision-making depending on what kind of home loan you need.
Mortgage rates go higher for a variety of reasons. Borrowers should know that typically, what’s good for the economy can mean upward pressure on mortgage rates.
Conversely, bad news for the economy can mean good news for mortgage loan interest rates.
So what’s a borrower to do?
If you seek an FHA refinance loan to get out of an adjustable-rate mortgage, your course of action might be as simple as comparing the rates your lender could offer you on a refi loan versus what you are paying now.
But if you are interested in getting a fixed-rate mortgage that exceeds the loan limits (a Jumbo loan), higher rates might mean a deal that isn’t quite as good for you as when rates are lower. (Jumbo loans can feature higher mortgage loan rates than conforming loans).
You may want to look at the rates and decide whether or not now is the best time to commit. Sometimes the answer may be “yes”, and sometimes the answer may be “no”. It’s a good idea to take advantage of the experience of your loan officer in cases like these–ask what they would do if it was their money on the table.
Rising mortgage rates are part of the ebb and flow of the marketplace and it’s common to have periods of elevated rates when economic conditions, market trends, and other variables all put upward pressure on home loan rates.
A sustained upward trend might be an indicator that it could be smart to wait.
Some ask at this point how to watch rates in a rising environment to get the most value for the investment on their home loan or refi loan.
But there’s no real way to predict what conditions will exist tomorrow–try to “call” a mortgage rate rally and you may be frustrated by the results if circumstances wind up forcing mortgage rates higher.
You can look at past interest rate performance to give you a hint about what may happen next, but there’s a very old rule of thumb to consider; “past performance is not a reliable predictor of future results.”
Those are words to live by. The bottom line when trying to decide on mortgage rates when those rates are trending higher?
You have to make your best choice (get some lender advice in this area before you commit) with the information you have.
If your instincts tell you to wait, that may be the best idea. If they tell you to commit before rates go any higher, that is also a sound strategy if you suspect rates won’t fall to a more acceptable level anytime soon.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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