The current rates are at historic lows, even after the Great Recession of 2008. Rates have remained steady and some have asked why they have not gotten lower. There are two catalysts playing an important role that have been ripple effects caused by the Pandemic:
1.) Banks are experiencing capacity issues due to high refinance volume as a result of the historically low rates. Early COVID-19 talk started to lower rates and refinance volume increased drastically causing some banks to reach maximum capacity on loan volume.
2.) Some homeowners have been affected by increased unemployment that has resulted in an inability to make their monthly mortgage payment, This has caused issues for banks internally that requires a lot of capital and holding rates where they are, or possibly increasing for some loan programs. For example, some banks are requiring you to hold a certain amount of Liquid Assets with them in order to process your refinance.
We cannot promise that rates will not get lower in the future as a lot depends on the pandemic. But currently, we are seeing the lowest rates in history that current homeowners are taking advantage of. Additionally, prior to the pandemic, we had the strongest housing market in the last 13 years and home values are still based off of those numbers. When considering a refinance, especially a cash-out refinance, appraised values play an important role and are directly correlated to the interest rate as equity is a compensating factor. You are currently in a position where you can take advantage of both higher home values based on a strong housing market and historically low rates.
The topic of forbearance is still evolving everyday depending from bank to bank. The FHFA (Federal Housing Finance Agency) did release promising news this week in regards to how they are going to handle borrowers who took the forbearance and are now looking to refinance. Once we receive all of the details, we will update you in our next Mortgage Minute.
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