Federal Reserve Bank

The Federal Reserve Bank

Seriously, folks, now is the time.

There are many reasons to refinance your home or investment property. The year 2022 is your best and final opportunity. Whether you have an adjustable mortgage or need cash out for other debts, now is the time to refinance. I am very serious. Several economic and political factors tell us that if you wait beyond this year, interest rates could become very unpleasant.

How about what the Federal Reserve is saying? More interest rate increases in the Federal Discount rate will most likely occur. The Discount rate is the rate of interest charged by the Federal Reserve to banks borrowing money from the Fed. And you can be certain that if the banks are paying a higher rate for their borrowed money that they, in turn, will increase the rate they charge you.

As the U.S. economy becomes healthier and healthier, the Fed has a preference toward raising their rate to slow inflation. Yes, the U.S. economy is getting stronger and, therefore, higher rates will follow.

We have seen this cycle before. Raised rates by the Fed will also increase the yield or rate of our U.S. Treasury Bonds. As Treasury yields increase, lenders will most certainly raise interest rates on home mortgages. There is a direct correlation between rising Treasury yields and mortgage rates.

Enough of this economic analysis. It is sufficient to say that almost all mortgage economists are making the same prediction.

Realtors, as well, have seen rates increase during 2021. Francesca Stedman at Sotheby’s International Realty, Santa Fe, has one of the top five producing teams at Sotheby’s. Francesca said, “We have seen interest rates increase from the 2.5% range for a 30-year loan to above 3.0%. I expect this trend to continue during 2022.“

Another Sotheby’s Realtor, Ashley Margetson, said, “Without a doubt, all home mortgages will have higher rates as we go into 2022. I am telling my buyers to secure their financing as soon as possible.”

So, what do you do about it? Gather your information and call your mortgage person. The rates are very low, on a historic basis. Not the lowest, lowest rate ever, but very, very good. A Fannie Mae 30-year rate of 4.625% is historically excellent. How about 3%, now?

Refinancing to get cash to retire other liabilities will prove to be wise. Mainly because the other debt you pay off in the future will be at a much higher interest rate.

I have even visited with clients who want to take cash out of their home with a new mortgage and invest in Bonds and interest-bearing accounts, expecting higher rates on their investments; or they wish to improve their home.

Do not wait. Mortgage companies are always saying refinance. Now, they are correct.



Jim Gay was a real estate broker for 20 years and has been a financial consultant to Fortune 500 companies. He is currently a broker/owner of The Mortgage Place, and can be reached at jim@tm-place.com or 505-986-9080.


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