The recent volatility in the financial markets have left many Americans feeling jittery.The Dow and S&P indexes suffered some of their worst losses of the year last week, and a shocking price move in the bond market sent the benchmark 10-year Treasury yield below 2 percent, the lowest level in over a year. U.S. oil prices also dropped below $80 a barrel, a two-year low.
But there is some good news. The significant decline in energy prices and bond yields could actually prove to be a silver lining for many Americans, helping to cut mortgage, transportation, and heating costs in the coming months.
Plunging mortgage rates
Falling Treasury yields pushed mortgage rates this week to lows not seen in over a year. The rate on the 30-year fixed mortgage fell below the psychologically significant 4-percent level. "Lower mortgage rates will benefit both homebuyers as well as anyone who bought a home in the past few years who can now look at refinancing," said Greg McBride, chief financial analyst at Bankrate.
For example, on a $250,000 loan, McBride said a drop in the rate on a 30-year mortgage from 4.25 percent to 4 percent would reduce a borrower's monthly payment from $1,229 to $1,193, resulting in a savings of $36 a month. That may not seem like much, but it adds up to $432 in savings over 12 months. A more dramatic decline in 30-year mortgage rates to 3.75 percent would bring that monthly payment down to $1,157 a month, resulting in monthly savings of $72 and nearly $900 over one year.
Less pain at the pump
Gasoline prices have plunged by more than 50 cents per gallon on average since the end of June. Pump prices are falling at the fastest rate in two years and are likely to continue to drop as long as oil prices decline. One-third of all U.S. gas stations are selling gas for less than $3.00 per gallon, according to AAA.
Most drivers are already spending about $5 to $15 less to fill up their gas tank than they were around the Fourth of July. Many families fill up the car four times a month, which means they could be saving $20 to $60 a month on gas depending on the type of car they drive. If your family has two cars that you fill up four times each, that would be a savings of $40 to $120 a month -- a significant savings ahead of the holiday season.
Lower heating prices
A drop in energy costs is good news for consumers as the temperatures fall. Most households may only see $20 to $30 in savings on their heating bills this season compared to last winter, but some customers could see a nearly $800 drop in their overall heating costs, according to the U.S. Energy Information Administration.
More than a third of U.S. households use natural gas to heat their homes and the price of that fuel is likely to be higher than last winter (electricity prices, which follow natural gas, are on the rise too), but the forecast for milder temperatures should mean overall consumption for the heating season--and your bill--will be lower than last year. If you're in the Northeast and use heating oil or propane to heat your home, you could see a 15-percent drop in your winter heating bill versus last winter. Propane users in the Midwest may pay the most in the country to heat their homes, but with the drop in propane prices, the overall cost will be about 30 percent less than last year, according to the EIA.