The financial market unrest this year is turning into a real boon for U.S. consumers who plan to purchase a home-—and for existing homeowners who could benefit from refinancing.
Concerns about China and the price of oil have driven global investors into the perceived safety of U.S. bonds and mortgage-backed securities.That’s why the average 30-year fixed mortgage rate has declined by nearly 50 basis points since the end of 2015. (A basis point is 0.01 percentage point.)
Mortgage rates are lower now than they were at the end of 2015, when the Fed tried to move interest rates higher. In fact, they’re trending towards record lows.
Yes, I forecasted mortgage rates would go up. And eventually, that will happen. (Honest!) But for now they’re still low, making home buying more affordable. Lower rates mean lower monthly payments, and the decline in fixed rates so far equates to nearly 6% more buying power. That’s basically the ultimate “I love you” gift to U.S. home buyers. And who’s your valentine? The world!
The decline in the price of oil, as well as concerns about China, precipitated the financial market shift, so any signs of stability or improvement in those markets would likely lead to higher U.S. mortgage rates. And such stability would also strengthen the hand of the Fed in continuing to tighten monetary policy.
In other words, this gift horse will be galloping away before too long. If you are in a position to refinance or buy a home this spring, start your search now. Take a look at rates in your market, and investigate some mortgage options that could ease your concerns about what rates might do in the short term.
For example, a common option today is a “rate lock,” which will let you fix the quoted rate for a specified period of days, to cover the time that it takes to close on a purchase or refinance.
A “float-down” option on a rate lock will enable you to lock the rate, but also benefit from another move down if indeed rates go even lower.
These options come at a cost in terms of points or rates, but they could provide you peace of mind on getting the lowest possible rate for the life of your loan.
Talk to your lender or broker to see if these options might make financial sense for you. Follow what rates are doing by visiting realtor.com daily.