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People are refinancing their mortgages like crazy

Mortgage rates have fallen even further and you can thank Brexit.

The 30-year fixed-rate mortgage followed Treasury yields lower, falling 7 basis points to 3.41% this week, according to Freddie Mac. Last week the fixed-rate averaged 3.48%, and a year ago it was at 4.04%. “Continuing fallout from the Brexit vote drove Treasury yields lower again this week,” said Sean Becketti, chief economist at Freddie Mac.

So if you’ve been considering a mortgage refinance, now’s the time. And you won’t be the only one – interest in refis is spiking, Google Trends shows. The last time there was this level of interest in refinancing searches was in July 2012.

Indeed, mortgage applications jumped 14.2% for the week ending July 1 from a week prior, according to data from the Mortgage Bankers Association (MBA). The Refinance Index increased 21% from the previous week to its highest level since January 2015. “Interest rates continued to drop last week as markets assessed the impact of Brexit, downgrading the likelihood of additional rate hikes by the Fed, and mortgage rates for 30-year conforming loans dropped to their lowest level in over 3 years,” said MBA’s chief economist Mike Fratantoni. The refinance share of mortgage activity increased to 61.6% of total applications, the highest level since February 2016, from 58.1% the previous week, the MBA said.

A few factors have been contributing to keep US interest rates so low, including the surprise vote in the UK to leave the European Union, a change in what investors expect the Federal Reserve to do, and a strengthening US dollar.

Rates were already low before the Brexit vote, but since then they’ve “moved deeper into three-year low territory and are currently threatening a run to ‘all-time’ lows (in reality, something akin to 65-year lows),” says Keith Gumbinger, vice president of HSH.com, a mortgage data company.

The drop in rates is opening the refinance window wider – if only a smidge. Homeowners with a fixed-rate mortgage above about 4.5% should at least consider the option and run the numbers, Gumbinger says.

Homeowners who have rate higher than 4.5% on a 30-year mortgage (those 4.5% loans were common up to 2011, says Gumbinger) would benefit from refinancing if they have excellent credit.

Freddie Mac