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Your Mortgage: The Surprising Way People Bet on Lower Rates

Mortgage rates have been unpredictable lately, falling when most expected them to rise. Yet interestingly, people looking at buying homes or refinancing their mortgage loans haven't acted the way you'd expect given these lower rates.

In the following video, Dan Caplinger, the Motley Fool's director of investment planning, looks at how refinancing activity recently spiked only after mortgage rates started rising from low levels. Dan notes that when rates rose sharply last year, Wells Fargo (NYSE: WFC  ) , Bank of America (NYSE: BAC  ) , and other lenders saw refinancing activity fall sharply. Yet even as rates fell early in 2014, mortgage activity didn't pick up substantially. Only once rates started going up did we start seeing a boost in activity, with an 11% jump in refinancings last week. Dan concludes that people want the lowest rates they can get, but when those rates start to rise, they stop hoping for even better results and instead take what they can get. With rates potentially rising further, locking in now might be a smart move for those not willing to gamble on their mortgages.

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  • Report this Comment On June 18, 2014, at 12:34 PM, lmclane22 wrote:

    I had to comment on this being in the mortgage origination side of the business. Applications spike last week because the week before interest rates were down and we were able to lock rates and begin processing files at the lower rates. By the time this week rolled, even though rates have increased, the applications from the week were submitted to the lenders. This gives the illusion of grasping for whatever they can get but it is not the truth. This week and the next few, barring something from the Fed announcement, you will see applications drop substantially.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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