Although mortgage rates are on the rise after having been at multi-decade lows for the last few years, homeowners looking to refinance may still have an opportunity to cut their mortgage payments each month by refinancing. Motley Fool analysts Gaby Lapera and Nathan Hamilton discuss current interest rates and the surrounding historical context. Check out the Motley Fool's mortgage site to help you compare mortgage rates and refinancing options.
A full transcript follows the video.
This podcast was recorded on Feb. 27, 2017.
Gaby Lapera: The Fed is really interesting. It's kind of like this mysterious shadowy body. I know that I've said this a few times, but if we had a little magic globe or crystal ball that we could look into, that would be great. But they do try and signpost like, "Yeah, we're probably going to raise them up/we're not going to raise them." And they have been saying, "Things look pretty good so far, we think we're going to raise them." They're not going to be aggressive. That's something to remember, they're not going to push [the fed funds rate] up by 2% points, it's going to be basis point increases.
Nathan Hamilton: And that's important to put into context, the whole longer-term side of it. If we look at where [mortgage] rates are now, even though they've increased quite a bit since December, they're at historic, multi-decade lows. If you look at the past 10 years, the 30-year mortgage peaked right around 6.76%. Right now, they're sitting at, I believe it's 4.3% this week. So, you have to put it into context. Sure, rates have spiked. But they're still historically low. And even if there are two or three rate increases in 2017, they will likely still be historically low.
Lapera: Yeah, absolutely. I think that's really interesting, because there's this generational divide. I remember opening my first bank account, and the interest rate on the savings account was, like, 0.01%. And I was talking to my parents, and they were like, "No, when we first opened savings accounts, of course the interest rate was like 5%." I was like, "I can't even imagine getting 5% on my savings." And it's the same thing with mortgages. Of course, they were paying far more in interest than I would be today if I decided to buy a home.