Could You Lower Your Mortgage Rate?
Just three days ago, data from Black Knight showed that 8.2 million borrowers could save big on their mortgages thanks to the recent decline in mortgage interest rates, but rates have continued to fall all week. Now, the number of borrowers that could benefit from a refinance has jumped to nearly 10 million.
The latest mortgage interest rate data from Freddie Mac, which was released Thursday morning, shows that mortgage rates fell this week to a three-year low of 3.6%. Just one week ago, rates sat at 3.75%.
That 15-basis point drop means that another 1.5 million borrowers would benefit from a refinance at the current mortgage rate, new analysis from Black Knight shows.
According to Black Knight, there are now 9.7 million borrowers who could cut their interest rate by 0.75% by refinancing their mortgages right now. That’s the most refi-eligibility Black Knight has seen in its time reviewing this data.
An interest rate decrease of that size would save the average borrower $267 per month over the life of their mortgage. Multiply that out by 30 years and that’s a savings of more $96,000 over the life of the loan.
Think about what each of those folks could do with $267 more in their pockets each month, or what they could with an additional $96,000 over 30 years. That’s a compelling incentive to refinance.
It should be noted that Black Knight defines refinance candidates as borrowers who currently have a 30-year mortgage with a maximum loan-to-value ratio of 80% and credit scores of 720 or higher.
Black Knight notes that its criteria are “conservative by design,” adding that there are some lenders that will do non-cash-out refis for borrowers with up to 95% LTVs and some for those with credit scores as low as 680.
As Black Knight notes, disregarding its own stated eligibility criteria, there are as many as 20 million mortgages that could hypothetically lower their respective interest rates by 0.75% by refinancing now.
“Mortgage rates fell to fresh multi-year lows this week as intensifying trade tensions rattled markets,” Zillow Economist Matthew Speakman noted this week. “Bond yields, which influence mortgage rates, have been consistently sliding over the past few weeks, as investors eagerly expected an easing to monetary policy. This week, however, rates fell sharply after the U.S. and China each took steps to escalate their months-long dispute.”
As Speakman said, the trade war has sent stocks tumbling, leading investors to move their money to the bond market. That increased competition has driven down bond yields, especially on the 10-year Treasury note, which usually tracks in line with 30-year mortgage rates. A drop in the 10-year Treasury typically signals a looming drop in mortgage rates as well.
And, according to Speakman, the low rates of this week may be likely to stick around for a while.
“Just a few months ago, it appeared that the two nations were on the cusp of a trade deal,” he said of the U.S. and China. “Today, they are at an impasse, with an agreement nowhere in sight.”
“This week’s escalation of the conflict greatly overshadowed a series of market-moving economic reports – including July’s jobs data, typically the most-watched report each month – and pushed mortgage rates down sharply, as investors sought the safe haven of government bonds,” Speakman continued.
“With a light dose of economic data on deck for the coming week, the market’s attention will likely remain on gauging the impact of the trade war on the global economy. Thus far, the developments haven’t been encouraging: In an effort to spark economic growth, the central banks in New Zealand, India and Thailand each cut interest rates by more than experts had expected,” Speakman added. “With trade-related uncertainty and the prospect of more rate cuts – both in the U.S. and abroad – unlikely to disappear in the near future, it appears that these multi-year low mortgage rates will be with us for a while.”
And if that’s the case, the population of borrowers who could benefit from a refi will only continue to grow.
Posted on housingwire.com on 8/8/19.