A snippet of an article from CNN’s Money section:
NEW YORK (CNNMoney.com) -- Mortgage rates continued to decline this week, plunging to the lowest level in decades, according to surveys from Freddie Mac and Bankrate.
Freddie Mac's weekly report said the 30-year fixed rate slipped to 4.44% for the week ended Thursday, the lowest since the government-backed lender began tracking the rate in 1971. Last week's rates stood at 4.49%, and a year ago it was at 5.29%.
Wow! Some of our readers are doubtless old enough (like us) to remember the early 1980s rates of 14%, 16% and higher.
Here’s a nifty chart from The New York Times that gives a great visual of the history of home mortgage interest rates going all the way back to 1900!
What’s it mean to you, the home buyer?
If you’re buying, a 1-point drop in interest rates means you can buy more house. A lot more. Call or email us to help you figure out the numbers for your own situation. But here’s an example.
Let’s say you’re financing $150,000. . .
|Amount Financed = $150,000||4.5%|
(principal & interest only)
Let’s work it the other way.
Let’s say you’re trying to keep your payment at about $950 per month, for principal and interest (not including property taxes, HOA fees, etc).
|Desired Payment = $950/month||Interest Rates are 4.50%||Interest Rates are 5.50%||Interest Rates are 6.50%|
|How much home can you buy for desired payment?||$187,000||$167,000||$150,000|
Holy cow! If rates drop from 6.50% to 4.50%, the homebuyer who’s aiming for a monthly mortgage payment of $950 can suddenly buy $37,000 more house for the same monthly payment.
Given that mortgage rates change almost daily, but home prices change much more slowly, home buyers do themselves a favor if they watch long-term mortgage trends instead of focusing only on home prices.
What does this mean for home sellers?
If you’ve been considering a price drop lately, you might be able to put it off for a few more weeks. The rate drop means potential buyers’ money goes further. Of course whether you need a price drop or not depends on your situation. Check with your Realtor. And ask yourself why you didn’t hire Chris & Heather, The Phoenix Agents at Thompson’s Realty in the first place. We’re awesome and here’s some of our clients who say so.