The best time to refinance mortgage loans may be right now; the best opportunities could be slipping away from us in the near future. The March meeting of the Federal Open Market Committee ended with the Federal Reserve governors voting to keep interest rates unchanged for the next month. This is good news for homeowners considering refinancing mortgage loans, because interest rates are at remarkably low levels now. But, the notes from the Federal Reserve meeting indicate that the Fed will not hesitate to raise interest rates in the near future if it appears that the economy is heating up enough to ignite growth in inflation rates.

As of the March 16, 2010 Federal Reserve announcement, the Federal Funds Rate and Discount Rate are both below one percent and the Prime Rate is around three and a half percent. These rates are used in indexes to determine mortgage rates, so if they rise in the coming months, mortgage rates will also rise. Because it appears that rates may rise over the coming months, homeowners applying for refinance mortgage loans should not accept adjustable rate mortgage contracts. Adjustable rate mortgages will have rising interest rates in an inflationary economy, so borrowers under these loans may find themselves unable to keep up with rising monthly house payments. In today’s low rate environment, a fixed rate fifteen or thirty year mortgage makes the most sense from the borrower’s standpoint. Prospective borrowers who want to get a fixed rate loan at a lower interest rate than their current mortgage should carefully analyze any proposals made to them to be sure the up-front costs of the refinance deal do not outweigh the long-term benefits of a lower interest rate.

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