Mortgage Rates Just Had Their Best Week In Over a Decade

If you thought the low mortgage rates were gone forever, think again

Per Freddie Mac, mortgage rates just had their best week in over a decade, thanks in part to the latest Fed policy meeting.

The popular 30-year fixed averaged a very attractive 4.06% this week, down from 4.28% last week and 4.40% a year ago.

Mortgage Rates Just Had Their Best Week In Over a Decade

In other words, rates dropped nearly a quarter percentage point, which is pretty unprecedented for Freddie’s weekly survey.

What Happened to Mortgage Rates?

  • The Fed released a favorable FOMC statement
  • That basically said economic growth was slowing despite a healthy labor market
  • And also laid out plans to slow the runoff of Treasury securities it owns
  • Which sent the 10-year bond yield to its lowest point since late 2017
  • In a nutshell, the Fed put the brakes on rate increases (which can indirectly affect mortgage rates) thanks to slowing economic growth and declining inflation.

Despite a strong labor market, they decided to maintain the current target range for the federal funds rate of 2.25% to 2.50%.

What that means in layman’s terms is the Fed isn’t convinced inflation is an issue, and they’re even concerned the economy could take a turn for the worse in the future, though they’re also fairly happy with the status quo.

Additionally, they announced a plan to curtail the runoff of Treasuries it currently holds on its balance sheet, which has essentially sent the 10-year bond yield to its lowest point since late 2017.

Because mortgage rates correlate with the 10-year bond yield, they’ve rallied over the past week to their lowest levels since January 2018.

Should You Refinance Your Mortgage Now?

  • This might be a great opportunity to refinance your mortgage
  • Especially if you took out a mortgage less than 12 months ago
  • When interest rates may have been ~.50% higher than today’s rates
  • Borrowers with ARMs might be able to get another cheap ARM or a new low fixed-rate mortgage

Per Black Knight, an additional 1.6 million homeowners now likely have the ability and incentive to refinance their mortgages, a near-50% increase from just one week earlier.

The so-called refinanceable population is now close to a two-year high after falling to a 10-year low just four months ago.

Tells you how quickly things can change, and why you have to pay attention to what’s going on with interest rates when you’re a homeowner.

Those who just took out their mortgages, say in the past 12 months, may benefit a lot from the latest rate improvement.

For example, you may have received a 30-year fixed rate around 4.5% or 4.75% recently, depending on your specific loan details.

Today, that same home loan might be priced closer to 4%, or even the high 3s depending on all the particulars.

On a $400,000 loan, we’re talking about a monthly payment of $1,909.66 versus $2,086.59, not to mention all the saved interest over the loan term.

That’s monthly savings of roughly $175 per month, along with thousands in interest savings depending on how long you actually keep the loan.