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Homeowners eyeing falling interest rates are now trying to refinance in droves, hoping to swap out mortgages for lower monthly payments.Refinancing applications jumped almost 60% percent this week from last year as the average 30-year mortgage rate dipped to its lowest spot in more than a year.The interest rate drop could also give home sales a boost.The average 30-year mortgage rate fell to 6.47% this week, down from 6.73% last week, according to Freddie Mac.That compares with about 7% a year ago and about 7.5% last fall.Refinancing applications climbed 16% across the country in the past week, according to the Mortgage Bankers Association.Mortgage rates have been ticking down for the past few weeks due to slower inflation, which could lead to the Federal Reserve lowering interest rates.Real estate and housing:Who is liable after a mortgage foreclosure that was assumed by a buyer?“If the recent drop in longer-term rates is sustained, then we expect to see another uptick in refinance applications and subsequent refinance mortgage volumes this week,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.But don’t expect a refinancing boom. More than 85% of U.S. homeowners with mortgages have interest rates below 6%, according to Realtor.com.Is it a good idea to refinance a mortgage?Financial experts say homeowners should wait until mortgage rates are at least 1% below their current rate to see a benefit.For example, a borrower who has a $400,000 mortgage with a 7.5% home loan rate is currently paying about $2,800 a month. With the current rate of about 6.5%, the payment would be around $2,525.What could be pitfalls in refinancing?There are also costs involved – usually a few thousand dollars – in refinancing that need to be considered in the overall cost savings.Also, consider how long you will keep the home. Will it be long enough to offset the refinancing costs?As with any loan, watch for hidden costs, such as prepayment fees.What is the forecast for mortgage interest rates?Rates are expected to dip more this year, possibly falling to 6%, economists say.So if refinancing a mortgage isn’t a good deal now, it could be later.Reach the reporter at catherine.reagor@arizonarepublic.com or 602-444-8040. Follow her on X: @CatherineReagor.
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