Declining Interest Rates Likely To Spur Refinances And Home Purchases
Last week, the Federal Reserve cut the target interest rate for the second time this year. This will most likely result in the continuing decline in mortgage interest rates. Home buyers will welcome the news of lower interest rates, which in turn equate to lower cost of ownership. Mortgage lenders will also likely see an increase in refinances, particularly among home owners who have purchased or refinanced within the past three years.
The chart below depicts Freddie Mac’s reported average monthly 30-year fixed interest rate since 2013.
As of August of 2019, the reported average rate was 3.62%, which is the lowest average monthly rent since October of 2016. The 3.62% rate is in stark contrast to the rate just one year ago, which was almost a full point higher at 4.55%. As can be seen from the tail end of the chart, beginning in January of 2019 rates have been steadily declining, due at least in part to the Fed’s cuts to the target interest rate in recent months. According to a report published by Black Knight, the continuing decline in interest rates has resulted in over 8.2 million loans being eligible for refinance.
The average monthly rate for September of 2019 is sure to continue the declining trend, particularly in light of the Federal Reserve’s recent cut to the target interest rate. This will likely continue to spur home buyers into purchasing while the cost of ownership is low, and will also likely continue to increase refinances of mortgage loans. How long this trend will continue remains to be seen.
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