A recent sharp drop in mortgage rates hasn’t unlocked savings just for those looking to purchase a home—homeowners may also benefit. About 5.9 million borrowers could see their rates drop by at least 75 basis points by refinancing their mortgages, according to Black Knight, a mortgage software and analytics firm. That is up by 2 million in the past month alone.
That’s the largest population of eligible borrower candidates in nearly three years for savings. The savings could add up to about $271 per month per borrower.
The average 30-year fixed-rate mortgage dropped below 4% recently, averaging 3.94% in the latest week.
If rates drop another quarter point, Black Knight estimates that 7 million borrowers could then potentially benefit from refinancing their home mortgage.
The drop in mortgage rates is also boosting affordability for home shoppers. The monthly payment on an average-priced home (assuming a 20% down payment) has fallen 6% over the past six months
“When we factor income into the equation, we see that it takes 22% of the median income to purchase the average-priced home,” notes Ben Graboske, president of Black Knight’s data and analytics division. “That’s the lowest payment-to-income ratio in more than a year as well, and far below the long-term average of 25.1%.”
Also, as of May, the monthly payment required to purchase the average-priced house with 20% down is $1,173, the lowest such payment in more than a year.
Economists say rates are dropping due to trade war disputes with China and Mexico. That is prompting lower yields as investors to flock to the bond market, which is typically viewed as a safety net. Mortgage rates loosely follow yields on the 10-year U.S. Treasury note.