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Mortgage Interest Rates Rising: Too Late to Refinance?

[Jun 12, 2009.]


Since hitting a low of 4.75 percent in May, average interest rates on a conforming mortgage are now hovering around 5.75 percent. News reports that big-time buyers of U.S. debt (read: Russia and China) remain worried about the direction of American economic policy played a role in the rise.

For borrowers who are thinking about refinancing, or even in the process of refinancing, should this full point jump be taken as a sign to throw in the towel for now, and try back later?

Not necessarily. Here are a few things to think about before giving up on a mortgage refinance.

Rates May Be Higher Than They Were, But They're Still Relatively Low

As a very smart man once said, in the form of a mathematical formula, "It's all relative." Nowhere is this truism more true than in the realm of mortgage interest rates. A full point rise like we've seen in the last month has the media talking about depressing stuff like a "stillborn housing recovery."

Use this loan calculator to compare the payment on a $400,000 mortgage at 4.75 percent to the same size home loan at 5.75 percent. The former comes in at a monthly payment of $2,087. The latter comes in at $2,334 per month. A significant difference, no doubt, but consider this:

The average rate at this time last year was 6.8 percent. To find out what kind of rate you can get on a mortgage refinance, go here.

Mortgage Rates Being Tossed About on a Sea of News

Between home price, politicians talking, Treasury auctions, stock market gyrations, jobless numbers, governent programs, and inflation fears, there is no shortage of news going on today. And today, news moves mortgage rates.

Could, then, news move mortgage rates lower again? Absolutely.

What type of news could do that? Experts are watching long-term Treasury bond rates the closest of anything. Treasury bond rates had been at two percent, and have since doubled, right in line with the rising mortgage rates. That jump started when Chinese politicians spoke negatively about the long-term prospects for the American economy.

Those two, interlocked factors--Treasury bonds and world sentiment as to the health of the U.S. economy--may be the most viable source of good news that could drive mortgage rates back down.

However, borrowers who have given up on a mortgage refinance may not be in a position to capitalize on any good news that does move rates lower.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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