Mortgage rates reversed course in the past week, but much of that move came within a 24-hour span last week that saw the equity and bond markets each do an about-face. While mortgage rates are not directly impacted by Federal Reserve interest rate cuts, to many traders the bond market appeared overbought and the stock market oversold in the wake of an emergency three- quarter point rate cut last week. Despite another interest rate cut this week, mortgage rates moved higher, dispelling a common misconception that mortgage rates take their cues from the Fed. Instead it is the outlook for the economy and inflation that are the real drivers of fixed mortgage rates. Even with the increase in rates over the past week, fixed mortgage rates remain below 6 percent. Refinancing and locking in a permanently affordable monthly payment is an attractive option for many homeowners facing the uncertainty of adjustable mortgage resets.
Fixed rate mortgages are currently the most attractive option for
borrowers. Six months ago, the average 30-year fixed mortgage rate was 6.71 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,291.88. Now that the average conforming 30-year fixed rate is 5.88 percent, the same $200,000 loan carries a monthly payment of $1,183.71.
