Listen to Numbers Instead
A few short weeks ago, nearly everyone (us included!) was anticipating mortgage rates to move lower. The media hyped up the forecasts. The Fed fanned the flames of these forecasts. We provided analysis to support the forecasts. But the financial markets often have a way of humbling bold predictors.
In early September, 30-yr fixed mortgage rates were hovering just over 6% and flirting to drop into the 5s. Since then, however, rates have aggressively climbed and are now threatening to return to the 7%+ range. DOH!!! It turns out we all were dead wrong.
We have several clients who would have benefitted from a refinance in September. Those lower rates could have saved them hundreds every month on their mortgage payment, and the closing costs were reasonably low. But many took the gamble of waiting to see if rates would fall further. Their decision to not take “the bird in the hand” has left them wondering how long it may take for rates to settle back down.
That’s why we shouldn’t rely on crystal ball forecasts from anyone (us included!!!) to make decisions. Our recent post titled “When Should You Refinance” reminded that we should let numbers decide for us. While we often provide analysis and predictions about the mortgage and real estate markets, we share with clients that timing the market can be a fool’s errand.
A refinance transaction is when we see the most clients attempt to time the market, and it’s the transaction that is hardest to pull it off successfully. We advise clients all of the time that timing a refi is just like gambling. There is more emotion than logic at play, and our feelings of wanting/needing a lower interest rate cloud our judgment.
In short, don’t listen to people or their interest rate forecasts. If you have a higher mortgage rate and would like to refinance, follow these three initial steps:
- Determine how much lower you’d like your monthly payment to be. Most folks like to see at least $100/month in savings.
- Multiply your desired monthly savings amount by 12. In most cases, this total should be your maximum amount you should pay for refinance closing costs.
- Work with us to set a target rate that achieves both your monthly savings amount and closing costs limit AND STICK TO THE TARGET! We will monitor & track mortgage rates constantly and advise you when/if we hit your target.
Mortgage rates should eventually settle back down. Take this opportunity to get a plan prepared to act decisively when the next refinance opportunity presents itself.