Economists' Outlook

Housing stats and analysis from NAR's research experts.

While mortgage rates hover near historical lows at 3.5%, in an effort to lower their monthly payments and boost cash flow, many homeowners have refinanced their homes. See here how much the monthly mortgage payment changes when rates drop from 4.0% (May 2019) to 3.5% (February 2020) and 3.0%.

Nationwide, it is estimated that the drop in mortgage rates from 4.0% to 3.5% decreases the monthly payment by $70 while a decline from 3.5% to 3.0% decreases the monthly payments by $65. Specifically, monthly mortgage payment is reduced from $1,1401 to $1,080 (3.5% rate) and $1,010 (3.0% rate).

However, the savings from lower rates depend on the price of the homes. At the high end, San Francisco homeowners have already seen a $300 drop in their monthly payments from the decline of the rates from 4.0% to 3.5%, and if rates will be even lower at 3%, refinancing the same-priced home would save an extra $290 per month. Specifically, monthly mortgage payment is reduced from $5,0802 to $4,780 (3.5% rate) and $4,490 (3.0% rate). Thus, a drop in mortgage rates by 100 basis points could boost homeowners’ cash flow by nearly $600 per month.

Here are the counties where homeowners can save more than $200 on average every month from a 50 basis points drop of the rates:

Graphic: More than $200 Reduction in Monthly Mortgage Payment

In this blog, we calculated the monthly payment for 3,120 counties across the United States at 4.0%, 3.5%, and 3.0% rates. See here how much homeowners can save from refinancing their homes.

Select a County from the dropdown and see how much monthly payments change over the different mortgage rates:


Table: County Median Home Price and Monthly Payment

See median home prices by county (Q4 2019).

1 For the typical home with a value of $266,300

2 Value of the home: $1.18M


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