Many homeowners have already jumped at the opportunity to lower their monthly payment, spurring a surge in mortgage refinancing applications.

And that was before the average rate on a 30-year mortgage fell this week to 6.47%, according to mortgage buyer Freddie Mac. As recently as May, the rate averaged 7.22%. It’s now at a 14-month low.

The rush to refinance makes sense, as even a slight drop in mortgage rates can translate into significant savings over the long run. For a home with the median U.S. listing price of $440,000, a buyer who makes a 20% down payment at today’s average mortgage rate would save over $300 a month compared to what it would have cost to buy the same home in October, when the average rate hit a 23-year high of 7.79%.

Still, there’s more to consider than the mortgage rate. It can cost thousands of dollars to refinance, and not all the fees can always be rolled into the new loan.

Breaking even on the costs of refinancing may take months or years, depending on the difference between your current rate and your new rate. So refinancing may not make sense if you’re planning to sell the home before that happens.

Here are some key factors to consider as you weigh whether now is the right time to refinance your home loan:

Are rates attractive enough to make refinancing worthwhile?

While mortgage rates have come down, the average rate on a 30-year home loan is still more than double what it was just three years ago.

Some 86% of all outstanding home mortgages have an interest rate below 6%, and more than three quarters have a rate 5% or lower, according to Realtor.com. If your mortgage rate falls within that range, you’ll want to make sure you can refinance to a significantly lower rate than you have now.

One rule of thumb to consider is whether you can reduce your rate by half to three-quarters of a percentage point, said Greg McBride, chief financial analyst at Bankrate.

“That’s when it’s time to start thinking about it,” he said.

Someone with a 30-year mortgage at 7.5% or 8%, for example, should be looking for rates to be in the low 6% range.

Homeowners with an adjustable-rate mortgage, or ARM, that’s set to adjust to a higher rate may also want to consider refinancing while rates head lower.

How long will it take you to break even on the costs of refinancing?

The break-even period on a mortgage refinance will be shorter the more significant your savings are. For example, if you’re refinancing from a rate of 8% down to 6%, the break-even period is going to be far shorter than if you refinance from 6.75% down to 6.25%.

So, it’s important to factor in how long you plan to live in the home, to make sure you’re going to make up the cost of refinancing.

Consider the overall and upfront costs

Charges and fees can shortchange refinancers who are focused only on the potential savings. And just because you can typically roll over many or most of the costs into a new loan doesn’t mean that loan is free.

If you’re rolling over the costs into your new loan, you’re either taking on a larger balance or you’re paying a slightly higher rate to compensate for those costs.

And there may be fees that you have to pay at closing, including costs for an appraisal, title insurance, a survey fee or local taxes outside the lender’s control.

Should you wait for rates to ease further?

Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy decisions. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The yield, which topped 4.7% in late April, slid briefly last week to around 3.7% as nervous investors sought out the safety of U.S. bonds following worse-than-expected labor market data. Yields fall as bond prices go up.

Beyond that, signs of waning inflation have raised expectations that the Fed will cut its benchmark interest rate next month for the first time in four years.

If bond yields continue to decline in anticipation of the Fed lowering rates this fall, that could lead mortgage rates to ease further, though most economists expect the average rate on a 30-year home loan to remain above 6% this year.

But an argument could be made that the bond market’s expectations of a Fed rate cut have already been priced in, which could mean rates don’t come down as much in coming months.

If you’re on the fence on whether to refinance now or hold out for lower rates, it’s good to at least get ready and speak with your lender or shop around, so that you can move quickly when you’re able to lock in an attractive rate.

“We are likely to see mortgage rates trend lower, but rates can move suddenly and it pays to jump on it when the opportunity arises,” McBride said.

LOS ANGELES (AP) — Home loan borrowing costs eased again this week as the average rate on a 30-year mortgage declined to its lowest level since early April.

The rate fell to 6.87% from 6.95% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.67%.

This is the third straight weekly decline in the average rate, which has mostly hovered around 7% since April. Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers’ purchasing options.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also eased this week, lowering the average rate to 6.13% from 6.17% last week. A year ago, it averaged 6.03%, Freddie Mac said.

“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Fed rate cut,” said Sam Khater, Freddie Mac’s chief economist.

Home loan rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

Yields have mostly eased recently following some economic data showing slower growth, which could help keep a lid on inflationary pressures and convince the Federal Reserve to begin lowering its main interest rate from its highest level in more than 20 years.

Federal Reserve officials said last week that inflation has fallen further toward their target level of 2% in recent months and signaled that they expect to cut their benchmark interest rate once this year. The central bank had previously projected as many as three cuts in 2024.

Until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to ease significantly, economists say.

Even then, mortgage rates “are likely to remain well above the 3.5% to 5% range that prevailed in the decade before the pandemic,” said Jiayi Xu, an economist with Realtor.com.

The average rate on a 30-year mortgage remains near a two-decade high, discouraging many would-be homebuyers. The elevated rates contributed to a lackluster spring homebuying season. Sales of previously occupied U.S. homes fell in March and April as home shoppers contended with rising borrowing costs and prices.

Another factor constraining the housing market is a tight supply of homes for sale. While it has risen this year, partly because properties are taking longer to sell, the inventory of homes on the market remains well below its pre-pandemic levels. A major factor is many homeowners who bought or refinanced more than two years ago are reluctant to sell now and give up their fixed-rate mortgages below 3% or 4% — a trend real estate experts refer to as the “lock-in” effect.

As of the end of last year, more than 50% of homes with a mortgage had a rate that was 4% or lower, and 87% had a rate at 6% or lower, according to Realtor.com.

“While it’s unlikely for mortgage rates to fall below 4%, a rate around 6% could strongly motivate many sellers to list their homes, thereby increasing overall inventory and exert downward pressure on housing prices,” Xu said.

LOS ANGELES (AP) — Sales of previously occupied U.S. homes fell in June to the slowest pace since January, as a near-historic low number of homes for sale and rising mortgage rates kept many would-be homebuyers on the sidelines. The national median sales price fell on an annual basis for the fifth month in a row, though fierce competition led to about one-third of homes selling for more than their list price.

Existing home sales fell 3.3% last month from May to a seasonally adjusted annual rate of 4.16 million, the National Association of Realtors said Thursday. That’s slightly below what economists were expecting, according to FactSet, and marks the slowest sales pace since January.

Sales sank 18.9% compared with June last year. All told, sales are down 23% through the first half of this year.

The national median sales price fell 0.9% from June last year to $410,200. That’s the smallest annual decline since March. While down from a year earlier, the median sales price rose from the previous month, reaching the second-highest level on records going back to January 1999.

“Perhaps home prices are beginning to firm up or at least certainly any downward pressure is ending,” said Lawrence Yun, the NAR’s chief economist.

The latest housing market figures are more evidence that even with prices easing back on an annual basis after rising for more than a decade many house hunters are being held back by a persistently low inventory of homes for sale.

Some 1.08 million homes remained on the market by the end of June, down 13.6% from a year earlier, the NAR said. That amounts to a 3.1-month supply at the current sales pace. In a more balanced market between buyers and sellers, there is a 5- to 6-month supply.

The shortage of homes for sale has kept the market competitive, driving bidding wars in many places, especially for the most affordable homes. About one-third of homes purchased last month sold for above their list price, and 76% of homes sold in June were on the market for less than a month.

“This is a tough market to be a buyer,” Yun said.

The combination of high borrowing costs and intense competition for the most affordable homes on the market is shutting out many first-time buyers. They accounted for 27% of home sales last month, down from 28% in May and 30% in June last year, the NAR said. In a normal housing market, that would be 40%.

The U.S. housing market has yet to emerge from a slump that started a little more than a year ago, when the average rate on a 30-year mortgage began to climb from ultra-low levels as the Federal Reserve began raising its short-term rate in its fight against inflation.

Global demand for U.S. Treasurys, which lenders use as a guide to pricing loans, investors’ expectations for future inflation and what the Fed does with interest rates influence rates on home loans.

The average rate on a 30-year home loan is still more than double what it was two years ago, when the ultra-low rates spurred a wave of home sales and refinancing. Weekly average rates on a 30-year mortgage ranged between 6.67% and 6.79% in June, according to mortgage buyer Freddie Mac. This week, the average rate slipped to 6.78%, the lowest level in four weeks. A year ago, the rate averaged 5.54%.

Higher mortgage rates can add hundreds of dollars a month in costs for homebuyers on top of already high home prices. They also discourage homeowners who locked in those low rates two years ago from selling — one reason the supply of homes for sale has been low even during the traditionally busy spring homebuying season.

Regional planners saw a great chance to open a much-needed commercial airport in Southern California after the sprawling El Toro Marine Corps Air Station closed in 1999.
But six years later, the base 50 miles south of Los Angeles is in limbo. Orange County voters rejected the airport plan and opted for thousands of new homes, office buildings and a huge park on the 4,700-acre site — development that has yet to begin. The base’s warehouse facilities are being leased to private firms, and a golf course and horse stables are used by the public.

El Toro is a striking example of how a military base closing, painful by itself, can lead to years of bickering and delays while divergent factions fight big battles over how to develop them.

It’s a situation that could lie ahead for dozens of communities across the nation after the Pentagon announced plans last week to close 33 major bases in 22 states as part of a $48.8 billion cost-cutting drive. Hampton’s Fort Monroe is on the list of military installations that were recommended for closure.

“The bottom line on base closure is that it’s always a trauma for the local community,” said Loren Thompson, chief operating officer of the Lexington Institute public policy group near Washington, D.C. He has advised municipalities around the nation on how to reuse former military bases.

Thompson said many communities tend to delay coming up with plans to reuse shuttered bases because they don’t want to accept the possibility of closure.

Once the military decides to decommission a base, it requires the local government to come up with a plan to redevelop the property. In many cases, it can take years to sort out the resulting disputes over how to replace lost economic opportunities or clean up the environmental waste that marks many of the sites.

“It’s not a very good track record,” said Leon Panetta, a former Clinton White House chief of staff who now co-chairs the California Council on Base Support and Retention, a panel formed by Gov. Arnold Schwarzenegger to coordinate the state’s base retention effort.

“If a community is divided on how a base will be reused, that will further delay the process,” he said.

El Toro Marine Corps Air Station had been operating since World War II when its closure was announced in 1993. A year later, countywide voters passed a referendum calling for an airport at the site.

Backers of the plan contended another regional facility was badly needed to help take the pressure off congested Los Angeles International Airport, 50 miles to the north. Annual air travel in Southern California is expected to double by 2030.

But a coalition of eight cities near the base fought the idea, arguing as part of later ballot initiatives that a commercial airport would be unsafe, hurt the value of homes and generate pollution and noise. Ultimately, it prevailed, in a second referendum.

“The communities immediately surrounding the property were very, very vociferous,” said Fredric Woocher, an attorney who represented the group behind the airport plan. “They managed to gather a large amount of money, often using public resources, to promote their position.”

The communities were not adequately consulted at the start of the planning process that led to the first airport referendum, said Meg Waters, spokeswoman for the El Toro Reuse Planning Authority, a government agency representing the eight municipalities.

“They failed Planning 101,” she said. “The Navy or federal government, by allowing the county to exclude the cities next to the base, set up a situation that was doomed to failure from the beginning.”

In February, Miami-based Lennar Corp. won the bidding to build 3,400 homes on the land and paid the Department of Defense a total of $649.5 million, or roughly $1.2 million per acre fit for development. Escrow is set to close July 12, with home construction to follow in 2007 after initial development work is done, said Emile Haddad, president of Lennar’s California region.

Another part of the base is slated to become one of the largest urban parks in the nation.

Still, the fight over the base isn’t over.

On May 11, the Los Angeles City Council voted unanimously to ask its regional airport commission to petition the courts and take whatever other action it could to have a commercial airport built on the former post. It’s unclear whether those moves could resurrect the airport plan.

Successful base redevelopment often comes down to whether a community has other economic engines besides the military, Thompson said.

“The communities that already have a lot going for them will benefit from the closures and the communities that don’t, won’t,” he said.

For example, when Philadelphia’s Naval Shipyard closed in 1991, it took out a third of the manufacturing jobs in the Delaware Valley, Thompson said. By comparison, the redevelopment of the former Fort Ord Army post in Monterey County, Calif., has been a success — part of the base is now used as a much-needed campus by the California State University system. *