30-Year Fixed Mortgage Rates are Back Under 4%. Is That Really a Big Deal?

30 year mortgage rates
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The U.S. housing market may have bounced back from its post-recession slump, but prospective buyers can still be on the lookout for savings.

The average 30-year fixed mortgage rate decreased last week to 3.97%, according to mortgage giant Freddie Mac. This is the first time the rate has dropped below 4% since the presidential election in November.

While the housing market has been strong for sellers and competitive for buyers, a drop in mortgage rates could further encourage aspiring homeowners.

Small Savings Add Up When Mortgage Rates Drop

For regular consumers, the difference is likely so small that it won’t be much of a factor in deciding when to buy a home.

“The monthly mortgage payment for a home at the median price of $236,400, assuming a down payment of 20%, would be about $40 less today than a month ago,” Laura Kusisto of the The Wall Street Journal reported. But in big housing markets, like California, people purchasing a house priced at $600,000 could essentially save $90 per month on their mortgage, she wrote.

Even saving $40 per month isn’t chump change when you look at a 30-year loan: The homebuyer who waited a month for the interest rate to drop this spring could save more than $14,000 over the life of the mortgage, assuming they don’t refinance.

But if number crunchers get anxious waiting for the rate to drop further, they may miss budget-friendly purchasing opportunities altogether.

Keep an eye on the 30-year fixed mortgage rate if you’re thinking about buying. Economists told Kusisto if it drops below 3.5%, it has more potential to significantly impact volume for both homebuying and refinancing.

Watch the Trump Bump

The recent rise — and more recent decline — in mortgage rates seems tied to the “Trump Bump,” which saw the economy boom as the country prepared for President Donald J. Trump to take office in January. Trump has promised to reshore manufacturing and create jobs, but it’s far too soon to determine the full impact of proposed policies.

In the meantime, potential homebuyers should keep an eye on the mortgage rate this summer as Fannie Mae* rolls out a new loan approval process that may benefit first-time homebuyers.

*The government owns both Fannie Mae — the Federal National Mortgage Association — and Freddie Mac — the Federal Home Loan Mortgage Corp. Fannie Mae buys mortgages from big banks, while Freddie Mac buys them from small ones.

Your Turn: Are you thinking about buying or selling a house? Will the recent drop in interest rates influence your decision?

Lisa Rowan is a writer and producer at The Penny Hoarder.