Once again, experts are surprised to see mortgage rates lower today than from where they began the year — to the point where I am actually refinancing the loans that I made last January.
MortgageNewsDaily’s survey for rates for a 30-year conventional mortgage started the year at 4.55 percent and ended last week at 3.81 percent. If you bought a house for $400,000 last January, then refinanced this month, between the increased amount you’ll be paying toward principal every month, and the lower monthly payments you’ll be making, you’d save over $13,000 if you sold your house in 10 years. You’d save $32,000 if you held onto it for 30 years.
Refinances are also making sense for anyone who still has a mortgage that originated 10 years ago. If you bought a house and took out a loan for $400,000 back then, your 30-year rate is probably higher than 4.5 percent, according to MND. Today you have 20 years left on that mortgage. If you were to refinance that mortgage to a 15-year, lopping off five years of payments, you could likely get a rate closer to 3.5 percent, according to MND, and save over $11,000 over just five years, and over $50,000 in the next 15. Your monthly payments might be $300 or so higher, but the amount of principal you’d be paying down is exponentially higher and the savings are serious.
I’m sure for many of you, with what you just spent on presents, the idea of saving that much money right now is welcome. It has been a wild ride the last two years. One measure of where experts think our economy is headed is the Federal Reserve’s movement of its federal funds rate, which is the rate the Fed charges banks to store money with them. When they think the economy is growing too fast and inflation starts to get out of control, they raise this rate to encourage banks to store more money there. When they think the economy needs a nudge, they lower the rate to encourage banks to take money out and put it into the economy in the form of loans to businesses and homeowners.
In 2018, they increased that rate 4 times. This year they decreased it 3 times. Now they seem to be in a holding pattern.
Throughout 2019 and most of 2018, experts increasingly predicted that we would be headed into a recession sometime in the next 12 months. In January of 2018, experts predicted a 13.11 percent chance of a coming recession. That peaked last September at 34 percent.
Since then, there has been a very sharp drop down to 25 percent this month. We are all in the midst of the longest economic expansion in this country’s history. Since the collapse in 2008, we have been growing steadily and slowly. With not a ton of hard data to show for it, more and more experts seemed to predict a looming recession simply because we were due for one. But the economy keeps on chugging along despite their fears.
After muddling back and forth for almost four years, average salaries finally started rising steadily from January 2018 to today. The lowest paid workers saw the biggest pay increases, according to a recent Wall Street Journal study.
Despite historically low unemployment rates, the job market keeps growing. Forecasters interviewed by the WSJ are predicting a monthly job growth in our country of 157,000, and economic growth to continue throughout 2020. In the housing industry, new home starts were up this year.
A growing economy typically signals rising mortgage interest rates. But a growing economy also signals job stability and salary increases. One would guess that rates are going to increase throughout 2020. And they should. Just like most predicted they would earlier this year.
Geoff Smith is a mortgage banker with Assurance Financial focusing on residential home loans for refinances and home purchases.
*The views and opinions expressed in this column do not necessarily reflect the views of Assurance Financial Group