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Mortgage rates sink to 3-year low, but one third of borrowers are making this big mistake

Due to increasing tensions over a trade war with China, investors rushed to relative security on the bond market last week. This sharply reduced the return on the 10-year Treasury, which is loosely following mortgage rates.

The average rate on the popular 30-year fixed-rate mortgage reached 3.70% on Friday, the lowest since November 2016, according to Mortgage News Daily. That percentage is likely to fall even lower today, as bond yields continue to fall.

The fall last week meant that 8.2 million 30-year-old mortgage holders could probably qualify for refinancing and save at least 0.75% on their current interest rate, according to a new report from Black Knight, a mortgage software and analysis company.

However, the size of that population is still very sensitive to even the slightest interest rate movements, because so many borrowers have already refinanced to very low rates. Only a 1/8 of a point move lower can add another 1.5 million borrowers to the eligible refinancing pool, and the same move in the other direction would hit 1.3 million knockout.

“Lower rates have also increased purchasing power for potential home buyers who want to buy the average-priced home with an equivalent of 15%, meaning they can effectively buy $ 45,000” more home “while still keeping their payments the same as they would be last fall ”, said Ben Graboske, president of Black Knight Data and Analytics.

“Because the pressure on affordability has decreased, it also seems to be a brake on the slowdown in house prices that we have been following since February 2018,” he added.

Rates are now incredibly favorable for both refinancing and purchasing a home, consumers still have to look around for the best rate. But a full third of them are not, according to a new study by Fannie Mae. The vast majority of consumers will look for other products, but mortgages are apparently too discouraging.

“Unfortunately, comparing shopping for a mortgage can be a much more complicated and time-consuming process. Simply evaluating the “price” of a mortgage involves looking at various interconnected components – including rates, fees, and points – and making an assumption about how long a borrower stays in that mortgage, “noted Fannie Mae’s economist Doug Duncan in the report .

“Although it is easy to advertise” teaser “rates online, a real mortgage quote is based on a handful of variables that are unique to each buyer and that are evaluated differently by each lender,” he continued.

Consumers instead rely on advice from family and friends or simply go to the same lender they used before.

“Non-shoppers also reported much less concerns about competitive conditions when selecting a lender, citing other non-financial priorities, such as customer service / responsiveness and having an existing account with a credit institution. Individual households may have a good reason to accept that consideration, “added Duncan.

Mortgage interest has been fairly volatile lately, so borrowers who can take advantage of refinancing have to act quickly. Rates may go down, but different lenders will respond to changing market conditions in different steps.

“However, once the dust has disappeared, we are talking about switching to the” mid 3’s “for the best 30-year fixed rates,” said Matthew Graham, chief operating officer of Mortgage News Daily. “Can the rates be lower from here? Certainly! Rates can always be lower. “

Of course, if the rates go historically low, there is a pushback from both lenders and investors in the bonds that support mortgages, because they will both see a falling return. If fewer of those bonds are purchased, the prices can be returned.

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