As we enjoy the waning days of late summer, the air isn’t the only thing changing—the mortgage market is, too. Last week was a big one, with 30-year mortgage rates hitting their lowest point since October 2024. This drop, while slight, is a major headline and a positive sign for both prospective homebuyers and current homeowners alike.
This shift in the market is a direct result of recent economic data. The labor market, in particular, showed signs of cooling with a weaker-than-expected jobs report, which has increased the likelihood of a Fed rate cut. While it’s important to remember that a Fed rate cut doesn’t always lead to lower mortgage rates, this news has certainly created a buzz in the market. We also saw continued growth in the services sector and new orders, which shows a healthy economy, despite persistent inflation and hiring challenges.
So, what does this all mean for you?
For many, this drop in rates means a potential opportunity to save money on their monthly payments. In fact, according to recent data from Freddie Mac, the share of refinance applications has reached its highest level since last October. This tells us that homeowners are paying attention and exploring their options.
However, before you jump to refinance, it’s crucial to do the math. A small drop in rates, while exciting, doesn’t always make it worthwhile to refinance immediately. If you’re interested in talking over a strategy for you, we can find your magic number to make refinancing a smart financial move. This is because you need to account for closing costs, fees, and the time it takes to recoup those expenses with your new, lower monthly payment.
For example, if it costs you $4,000 to refinance and you save $200 per month, it would take you 20 months just to break even. After that, you’d start to see real savings.
The math can be even more favorable for those with shorter-term mortgages or conventional loans. Borrowers with 15-year mortgages often break even faster and accumulate more savings over time than those with 30-year loans. Likewise, refinancing a conventional loan can often lead to greater long-term savings compared to government-backed loans like FHA or VA.
While the market is showing promising signs, it’s wise to be patient and strategic. With new economic data, including August’s Consumer Price Index (CPI) and Producer Price Index (PPI), due out this week, we could see some volatility. The Fed will also be entering its “blackout” period before its meeting on September 17th, so no public comments are expected.
If you’re thinking about your next move, I’m here to help you run the numbers and see if this is the right time for you. Just send me an email to get started, or call/text me at 818.307.6072.
