Low interest rates keep homes affordable
Despite analysts’ predictions that rates will rise, they have maintained an average that makes it an excellent time to look into buying a home. For nearly two years now, mortgage rates have steadied themselves at a historical low.
Currently hovering at an impressive three and half percent over a 30 year fixed plan makes it a truly attractive investment. Locking in these national affordable rates before they disappear could be a very wise move toward your future.
Where rates came from and where they are going
It was only 15 years ago that the annual average rate on a 30-year loan listed at just over 8%. And it was ten years prior to that they came in at just over 10%. The fact remains that the current rates that are available are less than half of the 30-year historical average.
Since rates seem to have steadily declined through 2015, the 3.5% rate that is available now, seems likely to still be available in the very near future. At this same time just one year earlier, homeowners now pay $54 less a month on a 100,000 mortgage. What this equates to for you and your family is, an astonishing 10.6% in savings for the annual family budget.
The effect on the economy
It is common for interest rates to rise and fall, influenced by a wide range of variables and reasons. These situations can spell savings for you if you know how to take advantage of them. It is always a good sign when the national economy is collectively doing well. Generally, the buying public likes to enjoy the easy feeling that accompanies safe and comfortable buying.
This can however create a housing demand which can potentially cause rates to rise over a period of time. Although the shared public sentiment agrees that the national economy has not yet fully recovered, and while this may be true, they feel far more comfortable entering into possible loan situations than that of just a year ago.
This is where analysts disagree, some insisting that the current rates will hold or even slide a little lower still, while others predict a slow rise throughout the rest of the year eventually landing somewhere between 4 and 5 percent. So how will all of this effect the potential homebuyers of today? Those who choose to lock in the low average can enjoy the benefit of some extra savings.
Typically people do one of two things with these savings, one is to just save it all and the other usually chooses to engage in home up-grades and renovations to realize the home of their dreams.
What this means for the average home buyer
Put very simply, a 3.5% rate over a 30-year, 100,000 fixed loan equates to a monthly cost of $449 not including tax or insurance. A rate at 6% on the same loan pushes the monthly payments to $599, this is an increase of $150. I think this fairly plainly depicts what happens to home affordability when rates rise.
By Andrew Watson