Should You Wait for 4.5% Mortgage Rates to Refi?

Personally, I would not wait for the proposed, much talked about 4.5% mortgage interest rate.  Check out the last word from this Sunday's Seattle PI's real estate section: "4.5% mortgage rate seen as possible".

For the most part, mortgage interest rates are determined by supply and demand: they are bonds (mortgage backed securities) that are traded.  The Treasury has been discussing buying mortgage backed securities (MBS) from Fannie Mae and Freddie Mac which should lower rates.  Mortgage interest rates are not set or directly controlled such as the Fed Funds rate where the Fed decides exactly how much the rate will adjust, if at all.  Another factor to consider, if this becomes more than the current speculation, is that the talk has just been about purchasing Fannie and Freddie MBS.  Those who would potentially benefit from the future lower rate would need to qualify for a conventional mortgage.

What would I do if I were considering a refinance?

  1. Contact a qualified mortgage professional who has the ability to float down or renegotiate your rate should they dramatically drop after your rate is locked.

  2. Consider pricing the mortgage as a no-cost refinance so that should rates drop low enough, you can refinance again should it be justified.   

  3. Have a plan.  Review your goals with your mortgage professional to make sure refinance makes sense.  If you're not planning on retaining your mortgage long enough to break even, it may not make sense to proceed with a refi.  Focusing just on the rate and not factoring in closing costs and break-even periods can be costly.

  4. Get ready.  Apply early so you're in the best position to lock.  If today's current rates do not pencil out, determine what rate will.  Some mortgage professionals will agree to a "forward lock" in the event your target rate (or better) becomes available.

If a refi boom happens, be prepared for the transaction to take longer.  Fact is, there are now fewer people in this industry from Loan Originators, Processors, Underwriters and Escrow Officers to handle the increased volumes. 

Questions?  I'm licensed to provide mortgage in Washington State.  Contact me.

Related posts:

Get Ready, Get Set: Refi!

Declining Home Values: Good for Buyers, Bad for Refi's

Why Your Loan Originator Needs a Complete Loan Application Before Locking


  1. This is great advice for anyone seeking a mortgage in today’s market. Rates are exceptionally low right now, and consumers should not lose sight of that if they have the right house chosen. I’ve had clients play the waiting game on mortgage rates before, and it always seems to work against them.

    Rhonda, how do you see this action by the Fed impacting Jumbo rates, which haven’t come down like the conventional rates?

  2. Kevin, hopefully with MBS being purchased by the Fed/Treasury, it will allow banks to dabble back into the jumbo market (locally that would be loans over $506k). I’m afraid this may take some time as banks are pretty adverse to anything “outside” of the box. It’s a shame because there are many responsible consumers who happen to have large mortgages, plenty of equity and great credit…but because their mortgage is non-conforming, they’re being punished. I have been recommending local clients in this price range to consider local credit unions and small neighborhood banks who might offer more competitive rates.

  3. I’m waiting for it to get to .5% since I have a 1% loan right now. This is a buyers market and the depression has just started.

  4. I’m assuming you’re talking a HELOC, me.

  5. Rhonda…. this is an excellent read. It was short and to the point. You made some excellent points that made me smile, because to many people, even loan officers, just don’t have a clue in regards to what you just said.

    And as you stated, for many, it could be a long transaction because many are under staffed. And if not, there are enough that would not know what to do with a large volume. In any case, nice job here and some good education. jeff

  6. Thanks, Jeff. It’s so important that consumers understand the process and that some LO’s out there may over-promise with quick service time just to “get the deal”.

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