Mortgage rates dip below 4 percent

Mortgage rates are moving below 4 percent for 30-year fixed conforming loans with balances below $417,000 for the first time since they spiked in June 2013. It's not a huge move by the numbers, but psychologically it could be a major boost—potentially prompting a leap of faith for home buyers, but more likely a push for those looking to refinance existing loans.

"Rates have been under a bit of pressure so far this morning," Mortgage News Daily's Matthew Graham said Tuesday. "The first few rate sheets are right on the edge of 3.875 percent. Four percent would still be significantly more prevalent today, but 3.875 percent is out there for a few lenders."

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Mortgage rates, which loosely follow U.S. bond yields, have moved lower this month amid volatility in the U.S. stock market as well as weakness in financial markets overseas and global growth concerns. The average rate on the 30-year fixed had been stuck around 4.5 percent for much of the past year, falling slightly during the summer. On a loan of $400,000, the savings since that higher level is not dramatic, about $150 a month, but that might be enough for today's ultra-sensitive buyers.

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"Rates dipping below 4 percent might increase the sense of urgency for some home buyers," said Craig Strent, CEO of Rockville, Maryland-based Apex Home Loans. "That might be tempered, though, by low inventory in many areas, the result of which could increase competition for good homes, raising the sale price and potentially wiping out the benefit of the lower rate."

For refinancers, however, especially doing a no-cost refinance, it could be worth the trouble.

"Lower interest rates will impact refinancing for people who bought late in 2013 and early 2014. They can get half a percent off their rate now," noted Logan Mohtashami, a loan officer with AMC Lending Group in Irvine, California. "Some who are looking to take their private mortgage insurance off their home will take advantage of these rates with their higher home price."

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While the government has provided just over 3 million underwater borrowers the opportunity to refinance to lower rates through its Home Affordable Refinance Program (HARP), rising home prices have brought thousands of other borrowers, who did not qualify for that program, back into the black and therefore eligible to refinance. Then there are those who purchased their homes in just the past year, when rates were in the 4.75 percent range, who could also benefit, although that is a small population.

"As has always been the case, we need to spend more time at newly acquired lows for a significant portion of eligible and interested borrowers to be able to take advantage of them," said Graham, who says rates could go even lower from here.