Homebuyers and homeowners in the market have big good news regarding the commercial real estate mortgage rates. To those looking to refinance their loans, this is the best time to do so as there is an unprecedented opportunity to borrow at the lowest mortgage rates.
The commercial real estate mortgage rates have been the lowest this year due to the economic imbalance and the covid-19 situation. Thus, this might be the best time for you to refinance your loan if you’ve been thinking about it.
An interest rate of less than 3% on a 30-year fixed-rate mortgage was challenging to imagine pre-covid. The industry is changing now, and interest rates are trending way below the average levels for a few weeks now.
Additionally, the mortgage interest rates on 15-year loans have also plummeted considerably. It’s also safe to note that the mortgage rates have repeatedly broken the records of falling lo buy plummeting down to the lowest values across different types of loans.
The biggest question here is how long are these mortgage rates going to stay low? Knowing this might help you make your decision about whether or not you want to refinance your loan.
Therefore, if you are on the fence about a commercial mortgage refinance or want to buy a home, this blog will help you understand how long these low rates might last. Although it is impossible to predict this with certainty, some encouraging signs suggest that the commercial mortgage rates may stay low for a while.
Few key factors suggest commercial mortgage rates will stay low for a while
While several factors affect mortgage rates, one of the primary factors is the Federal Reserve’s actions. The actions of the Federal Reserve will have a direct impact on the banks and also the private lenders in the commercial lending market.
The Federal Reserve, in response to the economics, left and the covid-19 situation, is doing two big things which are helping to keep mortgage rates at their lowest, which are:
Number 1 – The Fed is keeping its rates low.
The overnight lending rate, which is the rate at which banks lend to each other, is something that the Federal Reserve sets. This is how the Fed controls other banks’ activities, although the Federal Reserve does not directly control the mortgage rates.
The overnight lending rate will probably remain between 0% to 0.2 5% for the foreseeable future. This will remain so until the inflation tops 2%, which is very unlikely to happen very soon, given the covid-19 situation and phase 2 of the pandemic beginning.
This low overnight ending rate will enable commercial real estate lenders to keep mortgage rates low to pass the savings on to the customers. Thus, as long as the fat is going to keep its rates low, the market’s mortgage rates are going to below.
Number 2 – The Federal Reserve is buying mortgage-backed securities.
As we have witnessed already, the Federal Reserve is buying mortgage-backed securities, and it has also affirmed that it plans to continue to do so in the foreseeable future. This process is called quantitative easing.
If we should not get too technical about it, this quantitative easing process ensures that the Mortgage lenders do not have to keep mortgage loans on the books – because there is a high demand for these in the secondary market. Therefore, this makes credit more available in the secondary market, which drives the mortgage rates down.
Besides these actions of the Federal Reserve, there are also other determining factors that indicate that the mortgage rates will be low for a while. The first one is that the mortgage rates generally follow the yield on the ten-year treasury bonds.
These ten-year treasury bonds have been trending much lower than the rate on home loans. This widespread between the mortgage loans and the treasury bonds means that there is room for Mortgage loan rates to fall low even further. This is also one of the signs that the mortgage rates would stay near rock bottom for a while.
Besides, as a thumb rule, we know that the longer the economy would remain sluggish, the more likely the mortgage rates would stay low.
While that isn’t good news, particularly for anyone, it is still true that the mortgage rates would stay low, which might be the best time for you to refinance your existing high rate mortgage or buy a home loan. However, although the mortgage rates are low, the availability of loans is not as free as it used to be in the market.
The reason? The increased commercial mortgage lending requirements are set up by the private lenders and traditional lending institutions alike. The new eviction laws, which have enabled borrowers to defer their payments for a year or so, has led to stricter lending requirements adopted by traditional learning institutions, banks, and private lenders alike.
This means that although the mortgage rates are at their lowest, not everybody will have an opportunity to grab their hands on the best loan unless they have a great credit score and a boastful lending history. However, if you are someone with a good credit score – this might be your best opportunity to get the best loan in the markets or buy a new home.
According to the available trends, the economy will remain sluggish for a while now. The leading economists predict a slower-than-anticipated recovery as the Washington leaders have not passed any legislation around the coronavirus stimulus. Thus, it is fair to predict that commercial mortgage rates are here to stay low.
And finally, one of the other obvious reasons why mortgage rates might stay low is the mortgage demand, which is tempered by a lack of available housing inventory. The lack of housing inventory will prevent these rates from being driven upward, and thus, we can expect them to stay low, at least for a few couples of months.
Low mortgage rates won’t last forever.
We can conclude that the mortgage rates will stay low for a while now, and the rates are very unlikely to go up anytime soon. However, no one knows that these rates are going to stay low for sure.
This is something that cannot be predicted with certainty. If the economy begins to improve very soon, and inflation trends get higher – then there is a possibility that these mortgage rates will also rise quickly.
The bottom line here is that nobody can predict the future with certainty. If you are considering a home purchase or want to refinance your expensive loan – this is the decision you need to make quickly so that you can really and encash upon this opportunity and get the best rates out there for your loan.
Ensure that your finances are in the best shape possible, and do not forget to compare rates with several mortgage lenders before you make a decision. If you find a loan that you are very happy with and can afford monthly payments – then do not have second guesses about taking the loan soon.
This is a time to lock it in. You were hoping that the rates might further lower might lead to the risk of missing out on it altogether.
To conclude, if you have been looking out for a new home loan or want to refinance your existing loan, taking action today is crucial. If you are ready to pull the trigger on a new loan purchase, start your research and find the best Mortgage Loans out there suiting your unique needs.
