I find it ironic that the news media continues to state the interest rates are still at an all time low. To the consumer - it may appear this way - but do they truly understand the advertisement or have the knowledge of how his/her individual rate is determined. In my - personal - opinion the rates are going up. To my knowledge, when my husband and I were refinancing in 2019 - and shopping for a good rate the loan officer provided some information on how its company determined the rate provided. [Being an experienced closer - I understood most of the process.]
- The credit rating of the individuals.
- Are you willing to buy down the rate (pay discount points - which is prepaid interest)
- The loan length (10 yr., 15 yr., 20 yr., and 30 yr.)
These were the primary considerations.
Back in December of 2019 - this was what was available to us (borrower) with excellent credit rating;
2 1/4% - 0 discount points - 30 years.
1.99% - 1 discount points - 30 years
1.5% - 2 discount points - 30 years
(Think about how often do you find that you actually carry your loan for 30 years; do you ever refinance so that you can take cash out for remodeling - or maybe other expenses; are you actually going to have the home for 30 years)
As a closer, and reviewing the CD - I watch the interest rate of the borrower - and the CD shows if the borrower is paying discount points. This is how I personally do my market watch. Of course, this is “never” discussed with the borrower - this is just how I watch the market.
Early 2021, I did not really note any change. Mid 2021, I noted interest rates go up to 3.25% with 0 discount points. Late 2021 (fall) - I noticed interest rates 3.75% with 0 points (or 3.25% with 1 point). Now, spring of 2022 the closings have been 4.25 with 0 points (3.75% with .75% points; 3.25% with 2.0% points).
Note in Fall of 2020 rate 2.25% with 0% points - now 2022 4.25% with 0 points. When we refinanced in 2019 we lowered our rate from 3.75% to 2.25% with 0 points.
How can they say the rates are at a all time low?
I know many receive advertisements to refinance at a low rate (we do). My husband hands the advertisement to me, and in fine print the rate is based on “paying” discount points (which is a percentage of the loan amount).
In my opinion, that is one of many reasons that our industry is slowing, as the interest rates are going up - and are not in an all time low.