Following weeks of lowering rates, the month of August had the lowest average mortgage rate in well over one year.
The average closing rate for a 30-year fixed rate mortgage was 3.77%, a drop of 10 basis points (0.10%) from the month of July. The drop was significant, but those following the housing market might have expected such a large drop.
Mortgage rates have been near their lowest levels of the past three years, and they have stayed low since the end of August.
The month of August saw strong economic growth coupled with low mortgage rates. In comparison, the average rate for a 30-year fixed rate mortgage in August of 2015 was over 4.31%. Average rates have been steadily falling since then.
Despite dropping rates, the housing market is one of the strongest sectors of the economy. In fact, the economy has been gaining steam over the past few months.
With the economy getting stronger, it’s only a matter of time until mortgage rates begin to increase. Rates tend to be lower when the economy is doing poorly.
Home buyers and mortgage rate shoppers shouldn’t expect rates to hold low for the remainder of 2016. With the summer buying season ending, it could start to become easier to find available homes at an affordable price – especially with today’s low mortgage rates.
Refinancers Taking Advantage Of Low Rates
Low rates makes home buying more affordable, but it also offers an opportunity for current homeowners to save on their mortgage by refinancing.
August’s low rates were reported by mortgage software company Ellie Mae in their Origination Insight Report. Ellie Mae collects mortgage data from across the country and releases their data in their Origination Insight Report each month.
According to Ellie Mae, the number of refinancers in the month of August increased by a large amount. Last month, 43% of all loans that went through Ellie Mae’s software were refinances. As a comparison, only 37% of loans in July were refinances, and just 34% in the month of June.
Low rates make refinancing a better option. Rates have been holding near low levels for months now, so more people are becoming eligible to save on their home through a refinance.
Refinances are becoming more popular across the board. Of all loan types, conventional loans were the most likely to be refinances. Ellie Mae reported that 54% of conventional loans last month were refinances, meaning more than half of all conventional loans were actually refinances.
Homeowners can still take advantage of low rates. Rates are still lower than they were in the month of June, and they are much lower than rates have been in the last few years.
Mortgage Rates Poised To Rise
The biggest news in the mortgage world right now is the Federal Reserve. The Fed has been holding their Fed rate low since they last raised it at the end of 2015. Markets are waiting for them to raise rates once again.
Mortgage rate shoppers, home buyers and potential refinancers will want to pay attention to what the Fed’s decision is.
If the Fed decides to raise rates, expect mortgage rates to rise over the coming weeks. While it would still take time for rates to rise to higher levels not found since earlier in 2016, lower rates make home buying and refinancing more affordable.
If the Fed opts to keep rates the same, mortgage rates might dip lower for a bit. This would prove to be an excellent time to lock in on rates.
No matter what their decision is, mortgage rates won’t stay low forever. The Fed is expected to increase their rate at least once in 2016, so those looking to lock in on low rates may want to act sooner rather than later.
Mortgage rates change every day, and mortgage news can change rates by a significant amount in just one day.
Rates have been holding near low levels for most of September, but they could begin to rise.