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