M
ortgage rates have slipped to the lowest point in a year, dropping below 6.2%. If the Federal Reserve keeps trimming its benchmark rate, the 10‑year Treasury yield – which closely follows mortgage rates – could fall even further. “A 30‑year mortgage could hit a five‑number rate in the coming months as the Fed cuts rates again,” says Doug Flynn, a New York‑based certified financial planner at Flynn Zito Capital Management. “That would likely give the housing market a boost.”
Most homeowners already enjoy rates well under current market levels. The National Association of Realtors reported that in August more than 81 % of owners had a rate under 6 %. However, buyers who closed on homes in the last two years when 30‑year rates peaked near 7.91 % now have a chance to refinance to a lower rate. Bankrate’s Mark Hamrick notes that for those with rates of 7 % or 8 %, the current average of 6.26 % for a 30‑year fixed loan can translate into real savings, especially for borrowers with strong credit who shop around.
Consider a $400,000 house with a 20 % down payment and an 8 % fixed rate. The monthly payment would be $2,348. If the rate dropped to 6 %, the same borrower would pay $1,919 per month—$429 less each month. Yet refinancing isn’t free. Closing costs can be substantial, so the potential savings must outweigh those expenses. “If you’re extending your term, say, starting another 30‑year clock, it means a longer journey to full ownership,” Hamrick cautions.
Flynn recommends first asking your lender about a “re‑cast” instead of a full refinance. “You may not get the absolute lowest rate, but it could cost only about $500 one‑time, and the bank simply adjusts your current rate to bring it close to today’s levels,” he says.
Mortgage rates rarely move in a straight line. Often they dip slightly just before a Fed announcement, then rise again after the benchmark rate is cut. As always, homeowners should budget for all costs of ownership, not just the mortgage rate. Christine Romans, senior business correspondent at NBC News, reminds readers to consider the full picture.
