For those of you considering refinancing your home mortgage, keep a close eye on mortgage rates over the next few days and weeks. Yesterday, the Fed announced that it would purchase up to $300 billion in U.S. Treasury over the next six months and $750 billion in mortgage-backed securities. Following this announcement, stocks surged and the interest rate on the 10-year treasury note fell 0.3% immediately. Here’s a portion of the Fed’s announcement:
To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.
All of this is good news for mortgage rates, which fell on the news yesterday as well. As the Fed buys these securities, the prices go up and the yields go down. As yields go down and the Fed pumps more dollars into the financial system, mortgage rates will fall. A 30-year fixed rate in the mid-4% range should be relatively easy to find with good credit, and rates may even go lower. I should add that there very well could be some very negative consequences down the road because of the Fed’s action, but first let’s do a quick rundown on where to go to refinance a mortgage.
How to Refinance a Home Mortgage
The starting point is with your current mortgage company. By refinancing your home mortgage with the bank that currently owns your loan, you may be able to save significant money through reduced loan costs, taxes and fees. So the starting point is with your existing mortgage company. If for whatever reason you need or want to look somewhere else, or just shop around, here are a few suggestions:
LendingTree: LT is an online mortgage broker that I’ve used before. You fill out an online application, and LendingTree routes your information to several mortgage brokers who compete for your business. You’ll receive an email and/or phone call from about three to five mortgage brokers who will quote rates for you. You can get more information and complete an online application at.
The Future of Mortgage Rates
As low as mortgage rates are today, they are likely to go up significantly over the coming years. The Fed is pumping billions of dollars into the market. Basically, it’s printing money. Yesterday, the dollar fell as a result, and most experts predict that significant inflation will result down the road. I’m not in the business of making big predictions, but inflation is a very likely outcome of our current monetary policy. That means that variable rate mortgages and home equity lines of credit are a risky thing to have. If you can lock in a low fixed rate mortgage now, you could end up saving a lot of money over the life of the loan.