Graham Skidmore thinks you should refinance now, and I agree.
Mortgage rates are like an ever-lasting rollercoaster. With the past few weeks of unexpected twists and turns, major dips and jumps, you can never know what will come after the next hill.
It doesn’t take a genius to realize that this year has seen a steady climb upward in the mortgage rate realm with rates reaching highs that haven’t been touched in the past 14 months.
Let me put this into perspective for you – according to Freddie Mac’s weekly Primary Mortgage Market Survey, last week’s nationwide average of 3.98% for a 30-year fixed-rate mortgage was the highest since April 5, 2012.
That’s a lot of calendar turns, people.
I sat down with Quicken Loans VP of Marketing Strategy and Business Channel Strategy, Graham Skidmore, to see what he had to say about the direction of mortgage rates. He has some stellar advice for folks out there looking to refinance their current mortgage or buy their first home.
Q: Are People Missing Out on a Great Opportunity to Get a Mortgage Right Now?
A: So, you’ve heard that rates have changed and you’re wondering if now is a good time to refinance. There’s no easy way to say yes or no to anyone, but here’s the thought process: Let’s say you could refinance two weeks ago and save $200 a month, but this week you can refinance and only save $150 a month. Are you going to wait to see if you can save $200 a month again? Or are you going to risk only saving $75 a month instead?
Can you still achieve your financial goals by saving $150 a month? Or will you not be able to reach your financial goals by saving only $75 a month?
Here’s something to think about. Rates go up way faster than they go down. The amount of force it takes to push rates down is much greater than the force it takes to push rates up. Think of it like pushing a beach ball into water.
So, answer is: If you have an opportunity to accomplish your financial goals now, take it. There aren’t any guarantees for the future.
Q: What’s Causing Interest Rates to Go Up?
A: You got an economy that’s getting better, and reports coming out saying it’s still improving. You have the government, which has kept rates this low for this long by purchasing mortgage-backed securities, saying that they may not be doing that anymore.
Good news for the economy is bad news for mortgage rates, basically.
You also have to take into consideration that the low starting point of rates was artificial – the government was forcing a situation, forcing that beach ball underwater and defying the laws of gravity.
Q: With That Being Said, with so Much Going on with the Government and Positive Economic Data, Do You Think That Rates Are Going to Go in Any Particular Direction in the Future?
A: The hardest thing about answering this question goes back to rates being so low last year. It was this whole artificial situation with the government forcing the beach ball into the water. You don’t know what the government is thinking and you don’t know how the government is going to react to things.
I would much rather take the guarantee of the savings today because I most definitely am operating under the assumption that rates are going to keep going up.
Q: That’s Fair to Say Considering Rates Haven’t Been This High in Over a Year.
A: Well, you also have to look at it in the grand scheme of things and say that mortgage rates are still extremely low and are still within a half a percentage point of record lows, and they haven’t been this low in the history of mortgages.
Q: You Got Me There. Have You Been Tanning?
A: No. I just have pretty good skin and seem to tan very easily.
Q: I Thought So. Anyway, What Advice Do You Have for Potential Refinancers or Home Buyers Out There? I Think I Know Where This Is Going, but I Want to Make Sure.
A: Since you have no guarantees for the future, if you can save money today, take it. The optimal time to refinance or buy isn’t over, but it could be very soon, so keep context in perspective and know that rates have been higher longer than they’ve been low like this. You don’t want to look back to the past and have regrets about missing an opportunity.
Q: Any Final Words?
A: Think about this – what good has ever come from procrastinating? When has waiting to the last minute to do something ever paid off in the long run? Don’t wait until the last minute when it comes to significant financial savings. They’re here for you today.
Worst case, I’m dead wrong and rates suddenly drop again. If that happens, you can refinance again if you want. But if rates rise, your opportunity to save could be gone forever. Nobody wants that.
There you have it, folks. Great advice from Graham Skidmore. I have to say, I totally agree. Talking to Graham reminded me of a video of Quicken Loans Chief Economist Bob Walters, who discusses pretty much the same thing as Graham, but in more detail.
If the video does not play, click here.
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