The cost of mortgage hikes steadily in the past years. On January 26 for instance, the 30-year fixed rate mortgage averaged 6.13%. This was higher than the previous year which was at 3.55%. It is true that mortgage rates have nothing to do with Fed rate hikes. But it impacts the movement in the 10-year Treasury yield. You could look at inflation in order to foresee the next mortgage next. Meaning, when inflation declines and moves to the Fed’s 2% target, then mortgage rates also declines. However, it is to note that you should not expect them to return at 3%.
If you happen to buy a home or refinancing one, it would be best for you to lock in the lowest fixed rate that you could get. Lacy Rogers from Texas-based certified financial planner noted this situation. She said that rushing into buying a house or car that does not fit your budget would be disruptive for you. Although the interest rate is attractive in the future.
Rogers suggests that you should ask the lender first if you can fix the rate on your outstanding balance. This suggestion is for homeowners with a variable-rate home equity line of credit. That means you have a plan for a home improvement project. Thus, you could efficiently make a fixed-rate home equity loan.
However, if talking to your lender is not possible, you could consider paying off that balance by taking out a HELOC. It could be with another lender at a lower promotional rate, said McBride. The rate for a home equity line of credit or fixed rate could rise due to their formula attached to Fed’s rate.