Experienced real estate agents and loan officers as well have had experiences with home buyers or refinance candidates that are fixated on interest rates. There is a certain characteristic with some individuals that compels them to research financial blogs, read and re-read minutes from the last FOMC meetings and follow the price of the 10-year Treasury to try and get a handle on mortgage rates. This is mortgage rate analysis by paralysis and will either keep someone from buying a home or waiting for rates to fall just a little bit more before refinancing an existing VA loan. But in the current environment, that’s more of a mistake now than perhaps it’s ever been.
First, pay attention to what the interest rate is actually for—it’s used to calculate a monthly payment along with the term and loan amount. On a 30 year fixed rate of say 4.50% on a $200,000 mortgage, waiting for rates to drop another 0.25% results in about a $29 monthly savings. Does that sound like very much to you? Certainly consumers should try and get the best interest rate they can but waiting for just one more nudge can be a gamble. Especially so with QEIII coming to an end in October and a slow, steady improvement in the economy. Certain Fed governors are clamoring for a rate increase sooner rather than later.
Second, there are economists everywhere that get paid to forecast interest rates and they fall into two categories—those that think rates are going up and those that think otherwise. And half the time one group is wrong. The point is that if it makes sense now to buy or refinance, don’t wait. It’s a gamble to see if rates will go lower. In fact, rates may never be this low again.