Homeowners rush to refinance as mortgage rates drop amid omicron variant
Expert says that now is the time to refinance a home mortgage before rates change again
Interest rates on fixed-rate and adjustable-rate mortgages have fallen in the past few weeks in the wake of a new coronavirus variant, giving homeowners the chance to refinance their existing mortgages at a lower rate. (iStock)
Uncertainty surrounding the emerging omicron coronavirus variant have caused mortgage rates to fall slightly, giving homeowners the opportunity to refinance to a lower rate. Mortgage refinance demand increased 9% last week due to the brief drop in interest rates, according to the Mortgage Bankers Association (MBA).
But the time to benefit from historically low rates is running out, as the MBA predicts that rates will rise in the coming months.
"Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller," said Joel Kan, associate vice president of economic and industry forecasting at the MBA.
Keep reading to learn more about how to take advantage of low mortgage interest rates by refinancing. You can visit Credible to compare mortgage refinance rates across multiple lenders at once without impacting your credit score.
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Mortgage rates drop slightly amid new coronavirus variant
While experts previously forecasted rates to rise, average mortgage refinance rates fell slightly for the first time in a month due in part to the unpredictability of the omicron variant.
"Mortgage rates declined for the first time in a month, prompting a pickup in refinancing, with government refinances increasing more than 20% over the week," Kan said. "While the 30-year fixed mortgage rate and 15-year fixed mortgage rate both declined only one basis point, the FHA rate fell 7 basis points, driving the surge in government refinances."
Average rates for the popular 15-year mortgage refinancing term have stayed steady at 2.375% for the past week, which can give homeowners the opportunity to pay off their home loans faster and save money while doing so.
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A Zillow survey found that nearly half of homeowners who recently refinanced to a lower interest rate saved more than $300 on their monthly mortgage payments on average, while almost a fifth saved more than $500. With rates as low as they are, it may even be possible for some homeowners to pay off their mortgage loans sooner without increasing their monthly payments.
View your estimated terms on a mortgage refinance loan on Credible, and use a mortgage calculator to see how much you can save.
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Will mortgage rates continue to drop?
The MBA's latest Mortgage Market Forecast predicts that average 30-year mortgage rates to rise to 4.0% in 2022 and 4.2% in 2023. While experts predict that mortgage rates will increase in the next year, the emergence of the omicron coronavirus variant has made the future more unclear.
The Federal Reserve has kept interest rates low to spur economic growth amid the COVID-19 pandemic, which has kept mortgage rates low during this time. However, the Federal Open Market Committee (FOMC) predicts a rate hike as soon as 2022. In this case, mortgage interest rates would also rise.
With no clear indication that mortgage rates will fall again, now is the time to refinance since rates are still historically low. In the past 3 years, the average rate 30-year, fixed-rate mortgage fell from 4.75% to 3.11%, according to Freddie Mac. The average 15-year rate dropped from 4.21% to 2.39% during that same time period.
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Although current mortgage rates are slightly higher than when they reached all-time lows in January 2021, they're still low enough to give homeowners the opportunity to save money on interest over the life of the loan, reduce their monthly payments and pay off their current mortgage faster.
If you decide to refinance, it's important to compare rates across multiple mortgage lenders to ensure you're getting the lowest rate possible for your situation. You can begin the mortgage refinance process by finding your rate on Credible.
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