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Comment by daddypro | Hacker News Reader

Does this interest rate transfer to lower mortgage rates? Is now a good time to refinance loans?

Just apply and see what rate they give you. The initial applications are annoying but once you've done that you can drag your application with a lender out for a long time so long as they can still mark it as an "active" file.

I worked in the industry and your credit score was the primary reason we based off your rate, and we knocked it down a bit if there was a promo or if you had autopay.

You don't get dinged hard by just applying. Ask how long they keep your credit report before pulling it again and just get rate quotes during that time period. It's smart and also lenders know when they'll be increasing rates before it goes in affect so it doesn't hurt to do it now and then just wade it out.

Also ask for a rate modification. Nobody knows about this but you can request to get just your rate modified and nothing else changes. It's WAY less time consuming, cheaper, you don't need an appraisal, and can be done in a day. The downside is you can't get "new money" (more than your current principle balance) and you're not extending your loan.

It will, but not just yet. There’s too many people trying to refi right now and supply can’t keep up with demand, so rates are higher than they should be. Give it another 3-6 months and I wouldn’t be surprised if mortgage rates fell by another 1%.

There must be some floor based on default rates right? If 2% of people default you can't go below 2%. And of course default rates go up in recessions.

If 2% of people default per year you can't go below 2%.

I personally don’t think there’s a floor, all that matters is spread over treasuries. If we go with your 2% number, that’s the spread between the mortgage risk and the risk-free rate. If risk-free goes to -1%, then it’d make sense for mortgages to go to 1%. This is something that already happens in European countries. I don’t think there’s an inherent reason for the risk-free rate to be a positive number.

On a different note, 2% default != 2% loss. Mortgages are secured by the property, losing investors only a small fraction in foreclosure, so a 2% default * 25% severity = 0.5% loss.

All very good points! Thanks.

Do we know what were the bottom 30-year fixed rates were after 2008, and how long it took to get there?

No. This is a rate for banks only. You get the rate banks pass on to consumers, which is obviously higher, because they need to make money.

Mortgage interest rates are usually "prime + x". So the prime reducing will reduce "prime + x" by the same amount.

For the same reason, I expect margin interest to drop by the same amount.

It's already a pretty good time to refi for most people as rates dropped to a bit under 3% recently. They went back up a little bit though as mortgage companies had to take on staff to handle all the additional demand.

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