Mortgage rates have dropped a lot in the last month or so, making it a good time to buy (one of the best in recent history!!) What happened, you ask? Well, The Fed dropped the Federal Funds Rate by a quarter percent in a move to continue growth and heading off recession. This is the rate financial institutions charge each other for very short term borrowing. However, mortgage rates do get the trickle down effect…
Mortgages and The Fed
If you bought a home late in 2018, you likely locked in a mortgage rate of at an average or near 5%. Right now, the average rates are at or near 3.7%. BIG DIFFERENCE! If this is you, you might could benefit from refinancing right now to take advantage of the lower rates. Of course, there are many factors that determine each persons rate including credit score, debt to income ratio, etc… and your lender is your best resource!
What Does This Mean for Home Buyers?
At the end of 2018, the forecast for mortgage rates in 2019 had been in the 5% + area. The Fed had been slowly increasing rates at the time of the predictions. At their July meeting, The Fed lowered its rate by .25% – this is the first rate cut since the Great Recession!
The reality is rates are in the mid 3% area for mortgages. During the past 50 years, the mortgage rate has never fallen below 3.3%, so being in the mid 3’s is a huge benefit for buyers. The monthly payment you are comfortable with is likely going to buy you more home or the type of home you want is going to be a bit cheaper on your monthly mortgage payment. You decide!
Looking to the Future of Mortgage Rates
While no one has a crystal ball that predicts exactly what will happen the remainder of 2019 or going into 2020, we all look to the experts for advice. Some say there may be another rate cut this year, while others think it will remain unchanged through the end of the year. Economic growth, the political climate and recession all play key factors. Waiting for rates to drop further may leave you disappointed.
The outlook for 2019 was rates as high as 5.5% and here we are at mid 3%. Again, experts are giving opinion and it doesn’t always come to pass.
The bottom line is, if you find your perfect home, now is the time to act! With historically low rates, you can buy a great home with a very affordable mortgage. Or, if you have purchased a new home in the last couple of years, talk with your mortgage lender to see if refinancing will benefit you!