There are finally some signs of relief in the housing market, which has been suffering under high prices and high interest rates for the past few years. The average interest rate on a 30-year fixed mortgage has dropped from around 7 percent to 6.57 percent in the last month, leading many homeowners to look at refinancing. But with a Federal Reserve interest rate cut likely coming next month, and possibly more behind that, some are questioning whether they should re-fi now or later.
The answer depends on your individual situation, starting with when you bought your house. "It might make sense, especially for people who bought a home in the past year or so and perhaps have an interest rate of 7 (percent) or above," says Cliff Freeman, real estate expert with Dallas-based Cliff Freeman Group. "Typically, the rule of thumb---and this is not set in stone---is if you can save a half-percent or more on your mortgage, it's a good time to look at refinancing."
While interest rates may eventually come down even more, Freeman doesn't expect them to fall to the 2-3 percent levels of a few years ago. He predicts rates will more likely settle into the 5-percent range as the new normal. Regardless, you shouldn't wait to try and time the market. "You've got to take advantage of it now, because if rates turn and go the other way, then you've missed out on an opportunity to save money over a period of time," says Freeman. "So if it makes sense now, I would say go ahead and do it. And if rates continue to drop down the road, you'll always have another opportunity to refinance."
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