https://moneywise.com/mortgages/debt/thepennyhoarder-low-interest-rates-refi## Low interest rates will stick around

Federal Reserve building
Wikimedia Commons

Fed officials say in a statement that they decided to make no change to their benchmark interest rate, called the federal funds rate. The rate has been close to zero since March, when it was first slashed in response to the economic effects of the pandemic.

The central bank wants to keep interest rates low until the nation’s weak inflation rate increases to over 2%. The latest forecast from Fed policymakers indicates you can expect no rate hikes before 2024.

The Fed also announced it would expand its bond-buying program by purchasing $80 billion in Treasury bonds each month and at least $40 billion in mortgage-backed securities. Those are investments made up of bundles of home loans.

“The Fed reinstated the asset purchase program to stop the meltdown in credit markets in March, which threatened to eclipse that of the global financial crisis in 2008-09,” writes Diane Swonk, chief economist at the accounting firm Grant Thornton.

The link to low mortgage rates

Loving couple looking at their dream house
ESB Professional / Shutterstock

The Fed’s deeply low benchmark interest rate most closely impacts the prime rate — the interest rate that lenders offer to their best borrowers.

But even though the federal funds rate doesn’t directly move the needle on mortgage rates, the low-interest rate environment has helped push mortgage rates to record lows this year.

Rates on 30-year fixed-rate home loans have been lingering at the all-time low 2.71%, according to the long-running weekly survey from mortgage giant Freddie Mac.

Cheap borrowing costs have sent Americans flocking to the housing market. Even with average home prices growing and inventory shrinking, low rates are still helping homebuyers save cash, Realtor.com suggests.

Homeowners also have been delighted to see shrinking rates this year, and have been refinancing their mortgages to cut monthly expenses. But mortgage technology and data provider Black Knight says another another 19 million mortgage holders could save an average $308 per month by refinancing now.

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Lock in super-low rates

Young smiling happy couple talking at home in the kitchen with laptop papers,
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For those looking to take advantage of rock-bottom rates, it might seem there’s no need to rush.

But several factors could push rates back up in the coming months.

After a 0.5% refinance fee went into effect Dec. 1, experts say many lenders are now rolling the cost into their refi rates.

And, while rises in new COVID cases are darkening the short-term economic forecast, the beginnings of a vaccine rollout are helping investors imagine a return to normalcy in the months ahead. Mortgage rates initially jumped when Pfizer first announced that an effective vaccine was in reach last month.

The best way to find the lowest mortgage rate is by shopping around. Compare loan offers from different lenders, because rates can vary from one to the next.

Once you’ve found one of those ultra-low rates, request a rate lock so it doesn’t jump before your loan is finalized. And for additional savings, shop around for your home insurance whenever you buy or renew your coverage.

Here's how to save up to $700/year off your car insurance in minutes

When was the last time you compared car insurance rates? Chances are you’re seriously overpaying with your current policy.

It’s true. You could be paying way less for the same coverage. All you need to do is look for it.

And if you look through an online marketplace called SmartFinancial you could be getting rates as low as $22 a month — and saving yourself more than $700 a year.

It takes one minute to get quotes from multiple insurers, so you can see all the best rates side-by-side.

So if you haven’t checked car insurance rates in a while, see how much you can save with a new policy.

About the Author

Ethan Rotberg

Ethan Rotberg

Former Reporter

Ethan Rotberg was formerly a staff reporter at MoneyWise. His background includes nearly 15 years as a writer, editor, designer and communications professional. He loves storytelling, from feature writing to narrative podcasts. His work has appeared in the Toronto Star, CPA Canada and Metro, among others.

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