The recent Federal Reserve rate cuts have sparked a wave of excitement among homeowners, especially those locked into higher mortgage rates. With rates at their lowest in two years, refinancing seems like a no-brainer. But hold your horses! According to personal finance expert and Ramsey Show co-host Jade Warshaw, waiting might be the smarter move.
While the rate cuts might make taking out loans and credit with lower rates seem enticing, Warshaw points out that only those currently in the market to buy a home stand to benefit right now. For homeowners considering refinancing, she advises patience. “If you bought at the height of rates, you are itching right now to refinance,” she said on Fox Business. “But I do think it’s worth it to wait.”
Warshaw suggests waiting until after the upcoming election. Why? Because election cycles can significantly influence economic policy and interest rates. Making such a big financial decision after the election allows you to assess the potential impacts on the market and make an informed choice.
It’s also crucial to remember that refinancing isn’t free. Bankrate estimates that refinancing a mortgage can cost between two and five percent of the new loan amount. For the average American mortgage debt of $244,498, that translates to a hefty $4,800 to $12,225 in additional costs. These costs don’t even include application, origination, and home appraisal fees.
While the Fed’s rate cuts have brought mortgage rates down, other lending products like credit cards and auto loans haven’t experienced the same level of relief. The reduction in credit card APRs has been minimal, offering only modest consumer savings. Therefore, it’s essential to avoid overextending yourself by taking on new debt in other areas while waiting for more favorable refinancing conditions.
The Fed is expected to implement further rate cuts through 2025, potentially pushing mortgage rates even lower. Predictions suggest rates could dip into the mid-5% range by year-end.
So, whether you’re considering refinancing or purchasing a home, staying informed and patient is key. Keeping a close eye on the market, especially as more rate cuts are expected, could lead to a brighter financial future with lower rates and fewer expenses.
