Mortgage rates are falling dramatically, which means millions more homeowners can now find benefit in refinancing their loans.
The average rate on the popular 30-year fixed has fallen from a recent high of 4.23% on May 21 to 3.94% now, according to Mortgage News Daily.
Investors are rushing to the safety of the bond market due to increased talk about trade wars between China and Mexico. When investors are skeptical about the short-term economic outlook, they tend to move their funds into longer term investments which causes yields to drop. Mortgage rates loosely follow the yield of the 10 year treasury note.
According to Black Knight, a mortgage software and analytics company, there are now about 5.9 million borrowers who could see their rates drop by at least 75 basis points by refinancing their current mortgages. This is an increase of 2 million just in the past month, Black Knight adds.
That is the largest population of eligible candidates in nearly three years and represents an aggregate of $1.6 billion in potential monthly savings. Per borrower, the savings is about $3,252 per year.
If the rate were to drop just another 0.25%, almost 7 million borrowers could benefit from a refi, with an overall savings of roughly $1.8 billion.
Rates falling is also benefiting buyers, especially since home prices are now leveling off. Home prices in March were up only 3.8% annually, the first time growth has fallen below its 25-year average of 3.9% since 2012, according to Black Knight.
Affordability is now the ideal it has been in more than a year, with the monthly payment on the average-priced house down 6% in the past six months (that’s with a 20% down payment).
“When we factor income into the equation, we see that it takes 22% of the median income to purchase the average-priced home. That’s the most favorable payment-to-income ratio in more than a year as well, and far below the long-term average of 25.1%,” wrote Ben Graboske, president of Black Knight’s data and analytics division.
With interest rates plunging and home prices leveling off, it is currently a perfect market for potential homebuyers as well as current homeowners looking to refinance. Whether the goal is to refinance to lower monthly payments or pull out some equity for home improvements/debt consolidation, we may not see a time like this again for a few years.
Now is the time to give Fellowship Home Loans a call at 800-804-SAVE to discover ways this drop can be a huge gain for you. When rates fall we’re ready to help you save. Fellowship Home Loans, Welcome Home.