Interest rates have moved lower since the Brexit vote at the end of June sent stocks crashing, the Pound Sterling down to lows versus the Dollar it hasn’t seen in decades, and all of the politician who led the Brexit campaign quit. But how much have interest rates actually moved since the Brexit vote?
I’ve kept up with interest rates daily since 2009. Since the Brexit vote toward the end of June, interest rates have only improved by 0.125-0.250%. Based on the number of “low interest rate” stories out there, you’d think interest rates would have dropped by at least a half point and have set new all time historic lows since the vote. Why all of the stories? I think it has to do with several factors:
- yields on treasury bonds have experienced some major change, but treasury bonds don’t impact interest rates. As discussed countless times on this blog (do a search for “MBS” or “mortgage backed security” in the search box at the top right of the main page of this blog), interest rates are impacted by the movement of mortgage backed security bonds. Those prices haven’t changed near as much as the treasury yields.
- the big move on interest rates was back in January of this year when interest rates dropped by over a half point from the start of the month until the end of the month. Interest rates have been about at this level for most of the year.
- why the “low rate” stories now? Well, in January, stories were focusing more on the Spring market, home sales increasing, new construction startups increasing, etc. By the time we approach July, the Spring Market is over, there is a natural lull in home sales (everyone goes on vacation in July), and something is needed to fill the 24-hour news cycle. The Brexit vote along with rates improving some since that vote provided the needed stories.
- since this is a normal “lull” period in the housing market, marketing efforts can now be turned to potential refinances.
Are interest rates low? Yes, absolutely.
Should one consider refinancing? Of course!
But don’t get swept away by it. You want to talk with an experienced mortgage loan officer who can give you the pros and cons of refinancing. For example, this morning I spoke with someone who wanted to refinance using a 15 year mortgage and pay discount points to get the rate into the 2’s. After running the numbers, his “break even” point on the monthly savings versus the closing costs for the new loan increased when he paid discount points to lower the rate! That wasn’t a typo… by paying discount points to get a lower rate, the amount of time needed to break even increased.
In the frenzy to secure a low rate, be sure to ask questions. Work with a mortgage loan officer who watches for trends and doesn’t hop onto the bandwagon of recent events. Someone who will discuss loan options with you instead of just quoting a rate and asking you if you are ready to get started. If the home you are looking to refinance is in the state of Georgia, contact me today. I can help you get going!
Besides… interest rates aren’t at their historic lows yet. That means there is still room for interest rates to improve.