Your Mortgage: The Surprising Way People Bet on Lower Rates

Would-be homeowners don't always act the way you'd expect. This popular move could blow you away.

Jun 15, 2014 at 8:05AM

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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Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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