The average rate on a 30-year fixed mortgage fell to 3.59% last week, according to Freddie Mac. That's a new low for 2016 and the lowest rate for mortgages since February last year.
Wall Street Journal staffer Joe Light looks at the likelihood that the return to this level will spur a surge of refinance activity. He notes that there are reasons to doubt an upcoming refinance boomlet could turn into a full-fledged boom. Light writes:
Generally, borrowers aren’t in the money for a refinance unless they can get a break of one percentage point, more or less, depending on how long they plan to keep the mortgage. Let’s assume it takes a rate drop of half a percentage point, at a bare minimum, to entice a serial refinancer to pull the trigger.
In the 104 weeks preceding February 2015, the 30-year fixed rate was above 4.09% nearly two-thirds of the time. That means a borrower paying close attention would likely find it beneficial to refinance, even setting aside those borrowers with an FHA loan that got the additional break.