The recent fall in mortgage rates won’t just benefit those looking to buy a home, but also those who’ve already purchased a property, should they decide to take advantage and refinance, experts say.
Around 5.9 million borrowers in the U.S. could see their mortgage rates fall by at least 75 basis points if they decide to refinance, according to an analysis by Black Knight.
That’s the largest population of eligible borrower candidates in nearly three years for savings. The savings could add up to about $271 per month per borrower, Black Knight said.
Mortgage rates are down because the average 30-year fixed-rate mortgage fell below 4% earlier this year, and now averages around 3.94%.
Should rates fall by another quarter point, Black Knight reckons some 7 million borrowers could see benefits by refinancing.
The rate drop would also make homes more affordable to those looking to buy one. The average monthly payment on a median-priced home, assuming a 20% down payment, has fallen 6% in the last six months.
“When we factor income into the equation, we see that it takes 22% of the median income to purchase the average-priced home,” Ben Graboske, president of Black Knight’s data and analytics division, told CNBC. “That’s the lowest payment-to-income ratio in more than a year as well, and far below the long-term average of 25.1%.”
Also, as of May, the monthly payment required to purchase the average-priced house with 20% down is $1,173, the lowest such payment in more than a year.
Economists say rates are dropping due to trade war disputes with China and Mexico. That is prompting lower yields as investors to flock to the bond market, which is typically viewed as a safety net. Mortgage rates loosely follow yields on the 10-year U.S. Treasury note.