30 Year Rates Fall Below 3.50 as 548,000 Homes Regain Equity

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Average 30 year mortgage rates increased last week to 3.51 percent, the first time in almost 3 months that rates were above 3.50 percent. The increase was short lived as 30 year mortgage rates fell to 3.49 percent this week. We expect 30 year mortgage rates to stay below 3.50 percent in the interim unless the Federal Reserve increases the fed funds rate this week.

As of September 18, the CME Group's FedWatch Tool has put the probability of a rate hike at only 12 percent. Since it's very unlikely the Fed will increase the fed funds rate, average mortgage rates will mostly fall from current levels this week.

Mortgage rates are indirectly tied to the federal funds rate. As the Federal Reserve raises or lowers the fed funds rate, bond yields usually follow higher or lower. Mortgage lenders set the rate they offer based on 10 year bond yields. As bond yields fall, lenders lower their rates and vice versa.

Mortgage rates are just above record lows. Locking in a lower rate before they climb can save you thousands of dollars over the life of your loan. If you haven't already taken advantage of these near-record low rates, you should consider refinancing. Even if you tried before, refinancing may now be an option since home prices are on the uptick and you may have more equity in your home. 

Core Logic (NYSE: CLGX), reported 548,000 homes regained equity in the second quarter of 2016 compared to the previous quarter. The percentage of homes with positive equity increased to 92.9 percent of all mortgaged properties, or approximately 47.2 million homes.

Unfortunately, there are still 3.6 million homes with a mortgage of negative equity, or 7.1 percent of all mortgage properties. Negative equity is when the mortgage(s) on the property are higher than the home's value. The number of homes with negative equity is declining sharply.  In the first quarter of 2016, the number of homes with negative equity stood at 4.2 million homes.

The only way to find out if your home has increased enough in value to refinance your loan is to get an appraisal. Before you take on the cost of an appraisal, consider whether or not refinancing makes sense for you. If you can get a refinance rate of at least 1.00 percent lower than your current rate and you plan to stay in your home for 3 years or more, refinancing is likely a good option.

You can see a list of refinance rates from many different lenders by using our mortgage rate tables at MonitorBankRates.com. Unlike most websites, you don't have to provide any personal information or contact information to see a list of rates.

Author: Brian McKay
September 21st, 2016