Refinance rates drop to lowest levels since March

Homeowners could have another opportunity to lock in record low mortgage rates this fall. Refinance interest rates have dropped to their lowest levels in the past six months, thanks in part to increased demands for long term bonds and further commitments from the Federal Reserve to continue to support the mortgage industry. Home loan rates may have peaked for the year in June, when they rose to the six percent range for a short period of time, fueled by concerns that the U.S. debt levels would scare away global investors. This fear quickly passed, allow rates to slowly move lower over the course of the summer months.

The market remains in a state of confusion. Historically interest rates have tended to move up in conjunction with the stock market. The basis for this movement was simply following the money; investors would take money out of bonds and place them into stocks. The removal of money in the system would force yields to move higher in an effort to continue to attract investors seeking higher rates of returns to offset their potentially investment opportunities in alternative investment programs.

Over the course of the past sixty days, the yield on the ten year Treasury bond has dropped from 3.5% down to 3.3%. This drop correlates to a move in fixed interest mortgage rates of .375%. Long term thirty year loan rates are now available for both refinance and purchase home loans, at or below five percent with numerous mortgage lenders. This drop in rates has positioned long term rates near 2009 low levels and is a great opportunity for homeowners who have yet to refinance their homes.

Mortgage rates have been greatly influenced this year by the Federal Reserve, in years past, FOMC announcements tended to have minimal impact on long term rates. This trend will probably hold true in the future, the big change is that the FOMC has committed billions of dollars to support the secondary mortgage market. Their commitment to purchase mortgage backed loan securities this year immediately dropped rates to historic low levels. The Fed has followed up on this commitment with their recent policy meeting, indicating they would continue to support this process, although they want to begin looking for an exit strategy. This commitment is one of the key reasons rates have dropped to their current levels, offering great opportunities for homeowners to refinance their mortgages and lock in long term rates that allow them to save thousands of dollars worth of interest over the life of their home loans.

For example, homeowners who refinance a $200,000 home loan and drop their interest rate down to 5%, from 6% stand to save $126 per month, $1512 per year and a staggering $45,360 over the life of their mortgage loan. This savings could help fund a retirement program or education savings program.