Brandy Auterson-Hurst:
4 Your Money is brought to you by NelsonCorp Wealth Management. It’s now time for 4 Your Money. We’re joined by James Nelson, Financial Planner at NelsonCorp Wealth Management. Welcome back.
James Nelson:
Thanks, Brandy.
Brandy Auterson-Hurst:
Okay, so now that the Federal Reserve is reducing interest rates, what might that mean for the housing market?
James Nelson:
Yeah. One of the most important things impacted by the Fed’s decision to lower rates are obviously mortgage rates, and we’ve seen rates come down pretty dramatically in the last year or so. They peaked at 8% right about a year ago, and things have backed off here recently. This is translated into some good activity in the housing market, specifically refinances, and I’ve got a chart here that shows some of this activity. The chart goes back to 2021 and we’re looking at borrowers who could refinance and lower their mortgage by at least 75 basis points. And as you can see, this measure peaked in 2021 and then dropped sharply in 2022. That’s when rates were going up. And now here in recent times, towards the tail end of 2024, we’re seeing this tick up. So the data shows that 4.2 million people could lower their interest rate by 75 basis points right now since rates have backed off. So whether that makes sense for you or not, it depends on several factors, but rates certainly have backed off and it’s been good for housing.
Brandy Auterson-Hurst:
All right, so how should homeowners decide if now is the right time to refinance?
James Nelson:
Yeah. I think there’s a couple things. The upfront cost to refinance always needs to be a consideration. Probably shouldn’t be refinancing if you plan to move in the very near term. Experts say if you can cut your rate by 0,5%, it usually makes sense. And then rates could fall further, so we could see rates back off even a little bit further. Tough to say where those go, but that’s certainly within the realm of possibilities.
Brandy Auterson-Hurst:
All right. James, thanks for taking the time to talk to us today.
James Nelson:
Thank you, Brandy.
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