mortgage

Mortgage rates reach lowest point this year

Mortgage rates inched downward this week, reaching a new low for the year amid growing geopolitical tensions abroad and mixed economic data in the United States.

30 year fixed rate mortgage – 3 month trend
  • The benchmark 30-year fixed-rate mortgage fell to 4.24 percent from 4.27 percent last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.74 percent. Four weeks ago, it was 4.28 percent. The mortgages in this week's survey had an average total of 0.28 discount and origination points.
  • The benchmark 15-year fixed-rate mortgage fell to 3.37 percent from 3.39 percent.
  • The benchmark 5/1 adjustable-rate mortgage fell to 3.28 percent from 3.32 percent.
  • The benchmark 30-year fixed-rate jumbo fell to 4.29 percent from 4.35 percent.

Weekly national mortgage survey

Results of Bankrate.com's Aug. 20, 2014, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:4.243.373.28
Change from last week:-0.03-0.02-0.04
Monthly payment:$810.74$1,169.05$720.81
Change from last week:-$2.89-$1.61-$3.63

This is the lowest level the 30-year fixed rate has reached in more than a year, according to Bankrate's weekly survey. On June 19, 2013, the fixed rate was 4.12 percent. Then rates spiked. They have since dropped, and in recent weeks, they have stayed near the bottom.

A second chance to refinance?

The low rates have opened the doors to homeowners who had already refinanced and now are learning that they can reduce their mortgage payments even more, says Jordan Roth, a mortgage specialist at GuardHill Financial Corp. in New York.

Featured Rates

"The drop in rates since June has allowed people who had already refinanced to refinance again," he says.

The latest refinance report released by the Federal Housing Finance Agency this week shows that the refinance volume increased slightly in June, but it is still far from levels seen during the refinance boom from previous years.

Many homeowners don't follow mortgage rates closely enough to realize they can save with a refinance, says Derek Egeberg, a branch manager at Academy Mortgage in Yuma, Arizona. Those taking advantage of the opportunity are mostly borrowers who are contacted by their loan officers.

When trying to decide if you would benefit from a refinance, consider the closing costs and how long it would take to break even, Roth explains.

"I don't look so much at the rate," he says. "Look at your monthly savings, divide those closing costs by monthly savings and if it takes you three years or under to pay off those closing costs, I think it makes sense to refinance."

How long will low rates last?

With the tensions in Ukraine and the Middle East, and with all the mixed economic data investors are trying to digest, it's unlikely mortgage rates will spike this year, Roth says.

Watch the Fed

But that doesn't mean borrowers can count on rates staying this low.

If you want to know what's going to happen to rates, watch the Fed closely, Egeberg says. He worries that once the Fed ends the bond-buying program that has been helping to keep a lid on rates, the rate environment might change quickly.

"October is when you might see the first major shift," Egeberg says.

No, really, watch the Fed

Another potential threat to mortgage rates will come once the Fed decides to raise the federal funds rate.

On Wednesday, the Fed released the minutes for the July Federal Open Market Committee meeting.

The minutes show that if the economy improves at a faster pace than expected, the Fed might raise interest rates earlier than mid-2015.

"Many participants noted that if convergence toward the committee's objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipate," the minutes read.

Depending on how investors react to the latest news, rates might fluctuate in coming days. But there's no need to panic yet.

"Rates are still great," Egeberg says.

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