Are mortgage rates still at historic lows?

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Indeed they are. Since the start of the coronavirus pandemic, the mortgage and real estate industries have been among the few economic bright spots. Demand for housing is up, and mortgage rates remain at or near all-time lows. Those trends are good but not for everyone: strong demand means sellers can command top dollar for their homes, low mortgage rates make homebuying more affordable for many, but home inventory is tight and prices have risen continuously.

It’s all good news on the refi side, however, with many homeowners seeing significant savings after overhauling their high-interest loans.

Read on for an overview of where the mortgage market stands now, and where things are likely headed.

Low rates mean savings

It may seem obvious, but low rates can save you money in a bunch of different ways. First, they mean lower monthly payments, which is good for your household budget. These low rates also mean you pay less interest over time. The savings can really add up when you’re talking about a multi-decade loan like a mortgage.

For many borrowers, low interest has also made shorter repayment periods more affordable. During the pandemic-fueled refinancing boom, 15-year mortgages saw a surge in popularity. These shorter-term loans usually have higher monthly payments than a 30-year mortgage, but borrowers save significantly on interest overall thanks to both lower rates and the shorter period of time that interest has to compound. For a $300,000 mortgage at today’s rates, that savings can be around $100,000 overall.

Some borrowers have even been able to refinance to a 15-year loan and keep their monthly payments the same as they were on their original 30-year mortgages.

No matter how you cut it, switching to a lower-rate mortgage will save you money. Keep in mind though: there are some other costs involved, so make sure to crunch all the numbers. Don’t just focus on the interest rate.

Where rates are headed

While rates are likely to remain low for a little bit longer, most experts predict they will start rising again sometime this year. Of course, this prediction is subject to change based on the path of the coronavirus pandemic and how the Fed responds to the ongoing market downturn under the new administration.

It’s a good bet, though, that rates won’t remain at these all-time lows beyond a year or two. They are likely to stay low by historical standards for some time, however. So, if you’re thinking about buying a house, don’t kick yourself too much if you’re not quite ready. You’ll still be able to get an affordable mortgage many months from now, even if the rate is a little higher than it would be if you applied for one today.

Why you should refinance if you haven’t

On the other hand, if you’re a current homeowner and you haven’t refinanced in the last year, you almost certainly should.

Because rates are likely going to start climbing again soon, you’ll miss out on potential savings if you don’t lock in a lower rate now.

Last year, Bankrate found that millions of homeowners stood to save on their mortgage by refinancing but hadn’t. For many, it may be because they’re so close to paying off their loans that the costs wouldn’t outweigh the benefits. However, if you’re still many years away from repaying your home loan, you should seriously consider a refi.

Make sure to factor in closing costs and attorney fees when you figure out how much you’ll save, but don’t leave money on the table.

Bottom line

We’ve written quite a bit in the last year about how low mortgage rates are, and while the trend is still here, it’s not clear how much longer you have left to save.

Take advantage of these low rates while you can, if you can, and check out some of Bankrate’s tools to help you figure out which mortgage products might be right for you.

Learn more:

Written by
Zach Wichter
Mortgage reporter
Zach Wichter is a mortgage reporter at Bankrate. He previously worked on the Business desk at The New York Times where he won a Loeb Award for breaking news, and covered aviation for The Points Guy.
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