When mortgage interest rates slide close to all-time lows — as they have since the Brexit vote — do you sit on the fence? Or do you ask yourself: Are there financial opportunities today that didn’t exist for me when rates were half a percentage point higher or more?
Last week, according to Freddie Mac, 30-year fixed rates dropped to an average 3.41 percent, just above the historic low of 3.31 percent set in November 2012. Fifteen-year fixed rates, popular with homeowners seeking to become mortgage-free faster, dropped to a stunning 2.74 percent. Five-year Treasury-indexed “5-1” hybrid adjustables, which carry a fixed rate for the first 60 months then morph into one-year adjustables, hit 2.68 percent.
If you’re a potential first-time buyer or a homeowner considering whether to refinance or you’re thinking about trading up or downsizing, rates this low could be worth your attention.
Consider these illustrations of what a half-percentage point cut in rate can mean. They were provided to me by Mike Fratantoni, chief economist for the Mortgage Bankers Association. Say you’re buying a home costing $239,700 with a 5 percent down payment. A drop in rate from 4 percent to 3.5 percent will save you nearly $100 a month in principal and interest. If you’re buying a house with the current median-sized purchase loan amount of $299,900, a half-percentage point rate drop will save you about $1,500 a year in principal and interest or $125 a month.