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Mortgage rates were already at record lows. Now they could go even lower

(CNN)An emergency rate cut from the Federal Reserve, the 10-year Treasury bond yield at historic lows -- if you've been waiting to refinance or buy a home, it appears your time has come.

The half a percentage point cut by the Fed on Tuesday brings the benchmark interest rate range down to 1% to 1.25%. That cut, along with a rock-bottom 10-year Treasury yield, means mortgage rates are poised to head even lower.

Mortgage rates have already been hovering near historic lows. Last week, rates fell to an average of 3.45% for a 30-year fixed rate mortgage and 2.95% for a 15-year fixed rate mortgage, according to Freddie Mac.

"It's definitely a good time for someone looking to buy a home to get financing," said Mark Hamrick, senior economic analyst for Bankrate. "Home prices have risen, and it is rough for those looking for a bargain, but the financing has gotten better."

And there is an opportunity for rates to go lower still, he said.

"If you're trying to look for the silver lining in the midst of the current climate," said Hamrick, "the mortgage interest rate is close to the top of the list."

Spring real estate market gets a boost

Volatility in the stock market and uncertainty in the economy doesn't bolster a home buyer's confidence, but knocking money off a monthly payment by getting a lower mortgage rate or refinancing can certainly help.

On the cusp of the spring home buying season, these rates are well timed, said Hamrick. But favorable rates alone aren't necessarily going to bring new buyers into the fold.

"Buying a home is a practical purchase," he said. "You buy because you're ready and you know how much you want to spend, the timing of the purchase and the location."

But this shift may bring those who were considering buying a home into the market more quickly.

"Hesitant home buyers will be enticed to take advantage of low interest rates," said Lawrence Yun, chief economist at the National Association of Realtors, in a statement.

He said the rate cut not only helps individual buyers, but also the entire real estate sector.

"The coronavirus has quickly upended global economic expansion and introduced the significant uncertainty of a possible recession," said Yun. "Today's interest rate cut is an appropriate response to changing events."

Move now or wait for lower rates?

Knowing when to make the move can be tricky.

If you're looking to refinance or secure a new mortgage, evaluate the immediate impact it will have on your finances, said Mike Hennessy, a certified financial planner with Harbor Crest Wealth Advisors in Fort Lauderdale. "If you can meaningfully save on your interest costs, build equity quicker, or extract equity at a reasonable cost to fund a renovation project, then take the bird in hand today."

For a mortgage refinance, start comparing the numbers that are being offered with what you currently have, said Cynthia Meyer, a certified financial planner with Real Life Planning in New Jersey.

"If the new rate is 75 basis points (0.75%) lower than the current rate, that it's generally going to be worth it to refinance after the costs of the refi," said Meyer.

"If you're planning to stay in your home, run the numbers to see if it makes sense to refi from a 30- to a 15-year mortgage as well," she said. "You may be able to pay around the same amount every month and get your house paid off a lot sooner, with lower total interest costs."

Shop around

Even before today's rate cut, lenders had been offering competitive rates and even including some closing costs, said Danielle Seurkamp, a certified financial planner with Well Spent Wealth Planning in Cincinnati, Ohio.

Still, it's always a good idea to shop around, she said. "You shouldn't assume you're going to get a good deal from a big bank just because you have your checking and saving account with them," she said. "Often the smaller, community banks offer the best deals."


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