It’s a Good Time to Refinance in the Bay Area, But Don’t Wait Too Long

For many homeowners in the San Francisco Bay Area, now is a good time to refinance an existing mortgage loan.

We are seeing record-low mortgage rates right now, as of late spring 2020. On top of that, home prices in many Bay Area cities are higher now than they were last year.

But you might not want to stay on the fence too long. Recent trends and reports suggest that mortgage rates could rise into summer 2020, on the heels of recent job gains.

Summer 2020: Good Time to Refinance in the Bay Area?

Last week, the average rate for a 30-year fixed mortgage loan dropped to 3.15%. That marked its lowest level in 50 years, to date. This week (ending June 5, 2020), home loan rates ticked up a bit. But they’re still hovering at historically low levels.

Most Bay Area homeowners who refinance their homes do it to secure a lower rate than the one they currently have. There are other reasons for refinancing, such as converting equity into cash. But the most common strategy is to get a lower rate and save money over the long term, by paying less interest.

That’s why now is a good time to refinance a home in the San Francisco Bay Area. Many homeowners have an opportunity to capitalize on today’s record-low interest rates, and to lock it in for the long term with a fixed mortgage loan.

The question is, how long will this trend last?

It’s difficult to predict mortgage rates over the long term. They tend to follow the up and down movements of bond yields. And bond yields can fluctuate based on a number of factors, including investor demand and changes in the economy.

That said, there’s a growing chorus of voices that predict mortgage rates could rise over the coming weeks. The reason — a positive jobs report and other signs of an economic upswing.

Matthew Speakman, an economist from the real estate information company Zillow, recently told The Washington Post.

As reports continue to emerge that show the economy may be beginning a modest recovery, suddenly there appears to be upward pressure on bond yields, and thus mortgage rates. To be sure, rates remain near their lowest levels on record, but after weeks of wondering why rates weren’t even lower, the paradigm appears to be shifting.

When he talked about positive reports emerging, he was referring to the recent news that the country gained 2.5 million jobs in May of 2020. That news surprised many economists, some of whom were expecting to see additional losses in May 2020.

Long-Term Outlook Less Clear

From a mortgage-rate perspective, now could be a good time to refinance a home in the Bay Area. Homeowners with positive equity, steady income, and sufficient funds to cover their closing costs could refinance into a lower rate and reduce their interest burden.

It’s easy to see where we are right now, and where we might be going next week. But beyond that, it’s really hard to say. Some forecasters have predicted that rates could drop again later in 2020. Others predict they could climb as the economy starts to ramp up again.

In its most recent quarterly forecast, published in April, the economic research team at Freddie Mac wrote: “Long-term interest rates, including mortgage rates, remain lower over the next two years.”

On the other hand, we have some industry analysts saying that this recent uptick in rates could be the start of a longer, sustained climb.

Matthew Graham, the COO for Mortgage News Daily, recently said:

Today [June 5] is the first time since the Covid-19 market reaction settled down in March that interest rates truly have a reason to panic. Until further notice, this looks like liftoff.

The bottom line to all of this is that we don’t know what mortgage rates will do as we move into the summer of 2020. But an argument could be made that they’ll inch upward in the near future. If that happens, Bay Area homeowners who refinance their homes later could benefit less than those who are refinancing today.

Doing the Mortgage Math

Will summer 2020 be a good time to refinance your Bay Area home? That depends on a number of factors, including your current mortgage rate and the length of time you plan to stay in the home (post-refi).

For most people, the goal is to save more money over the long term than what they pay in closing costs for a refinance loan. But you can’t do this kind of “mortgage math” until you have all of the variables in place. That’s where we come in!

We can review your current loan situation to determine how much you might be able to save going forward. It’s the only way to find out for sure if refinancing will benefit you or not.

Bridgepoint Funding has been serving the mortgage needs of homeowners and home buyers in the Bay Area for nearly two decades. Please contact our staff if you would like to know more about your refinancing options, or if you have questions about how it works.