The rate game

It seems that mortgage interest rates are difficult to predict.

Over the past couple of years, we’ve seen both economists and mortgage bankers trying to figure out when rates will start to consistently rise again. Meanwhile, rates hit a historic low in the first week of December and still hover around that point.

On Dec. 7, the average national rate on a 30-year, fixed-interest mortgage was 3.47% — the lowest in the history of the national Mortgage Bankers Association’s rates survey. People interested in a 15-year mortgage had the opportunity to secure one at 2.85%.

The market responded as expected. The Mortgage Bankers Association reported that refinance applications were up to their highest point since mid-October, and purchase applications were up 9 % from the first week of December last year.

While it’s great to see purchase applications up, the real story here is how the demand for refinancing has blossomed in the current environment. During the first week of December, refinance applications were at their highest level since January 2009. Furthermore, the refinance share of mortgage activity increased to 84% of total applications.

Of those refinance applications, 29 % of them in the first week of December were applied for through the federal Home Affordable Refinance Program (HARP). That program, of course, is the one set up to help people who are having trouble paying their mortgages to refinance at more favorable interest rates.

So, what are we to take from all of this information? For one thing, it seems there’s a focus on home sales when we’re talking about the national mortgage market. That’s only part of the picture. While it’s important to take a look at home sales, as a boost in them points to an improving economy, refinance applications can tell us a lot, too.

Also, the boost in refinance applications tells us low interest rates are helping homeowners save money. While lower interest rates can lead to more home sales, they can also help out a lot of people who already have mortgages and want to save perhaps hundreds of dollars per month on their payments.

Third, it seems mortgage rates stubbornly remain low. Why? That’s hard to say, but the opportunities low rates represent are very beneficial to consumers. The 15-year mortgage rate means those mortgages are more affordable than they have been in the past — good news for people who want to get out from under a mortgage in half the time they could under a standard, 30-year home loan.

Finally, the boost in HARP applications is more than a bit encouraging. HARP offers hope to people who are struggling with their mortgages and are in need of some relief.

Details about the HARP program are available through your local mortgage banker, so it may be well worth your while to set up an appointment and see what relief is available.

It’s proven difficult to predict when interest rates might go up again. It’s a safe bet that they won’t remain around current levels for long, so people looking to purchase homes or refinance them might consider taking advantage of those rates while they’re available.