2021 is upon us, and mortgage interest rates continue to drop. It is no surprise that these low rates have piqued the interest of both current and first-time homebuyers. Buying and refinancing when rates are low is very appealing. However, it is important to look at the housing market as a whole when determining how these rates will affect your homebuying and refinancing goals.
During the first week of January 2021, mortgage interest rates hit record lows again, with a 30-year fixed-rate mortgage at 2.65 percent surpassing the previous record on December 24, 2020. The average fixed rate for a 15-year mortgage also fell to 2.16 percent from 2.17 percent. These continuously changing rates show how quickly the housing market can shift. But is it for the better? First, it is important to understand why rates drop.
Why Rates Dropped
The Federal Open Market Committee (FOMC) is a group of seven governors of the Federal Reserve Board and five federal reserve bank presidents. Together, they hold eight meetings per year to determine interest rates. After much thought and consideration regarding internal and external factors, the FOMC made the informed decision to cut interest rates to better reflect the needs of both the people and the financial institutions. Their next meeting is scheduled for January 26th, 2021.
What Lower Rates Mean
When it comes to interest rates, lower is always better. Current low short-term interest rates – the rates at which financial institutions borrow money – enable potential and current homeowners alike to borrow money at an affordable rate.
Borrowing money is much cheaper than it has been in the past. For a first-time borrower, this means that regardless of a loan's terms – whether it is a 15-year fixed or a 30-year fixed mortgage – a large amount of money is going to be saved. However, due to current housing trends, these low rates are starting to come at a cost: high home prices.
While the low interest rates are creating a seller’s market, home prices continue to rise. This can create a dilemma for a first-time homebuyer. Is a one-time high home price worth a low mortgage interest rate over the lifetime of a loan? The answer depends on your individual situation. Contact a direct mortgage lender to decide the best way for you to take advantage of these low rates.
As a current homeowner, you may consider taking advantage of these low rates by refinancing. Whether it be an FHA streamline refinance used to secure a new, lower rate and save you money on your monthly mortgage or a cash out refinance that would put money in your pocket to do some needed home repairs or even build an art studio, refinancing your current mortgage and securing a lower rate might be the right option for you.
How to Seize These Low Rates
Capitalizing on low interest rates could be the best thing you do in 2021. At Wyndham Capital, we offer a wide variety of home loan programs to cater to every homebuyer, and applying for refinancing can be done within minutes. Whatever your situation, we can help you take advantage of these record-low interest rates. Contact us today to lock in your new rate.