By Sabrina Karl
Coronavirus fears and uncertainty are rocking financial markets, and one of the many impacts is tanking mortgage rates. Indeed, home loan rates dropped to their lowest level on record last week, as measured across 50 years of daily mortgage readings.
As a result, refinancing will pay off for a record number of U.S. homeowners, with each drop in the mortgage rate leading to more homeowners who can cost-effectively benefit from lower rates. According to mortgage data provider Black Knight, nearly 13 million borrowers should be able to save money by refinancing.
Black Knight indicates that those homeowners should be able to lower their current rate by at least 75 basis points, which is generally more than enough to offset refinancing fees. Note, however, that the 75 basis points measure is just an average and will depend on the borrower’s individual situation.
No-fee refinancing may also be an option, though no-fee rates are slightly higher. Each borrower will want to do the math of which option is more cost-effective for their situation.
Freddie Mac’s weekly reading of the average 30-year fixed mortgage rate fell to 3.29% last week. The previous low was 3.31% in November 2012. Last week’s average on 15-year mortgages was down to 2.79%.
Thirteen million candidates for refinancing is the highest number of potential refinance candidates on record. It is also an increase of 1.7 million eligible borrowers in just the last week and a 60 percent jump year to date. As a result, the phone is ringing off the hook at mortgage lender offices.
Whether rates will go lower still is debatable. But Black Knight estimates that a decrease in the average of just 4 more basis points — such as from 3.29% to 3.25% — would make another 1.7 million borrowers candidates for a cost-saving refinance.