Just when we thought they couldn’t get much lower, mortgage rates dropped again to reach new record lows. As mortgages become even more affordable, hopes are placed for further recovery in the reciprocal cycles of the housing market and economy.
Thirty-year fixed mortgages are reported at 3.83%, while 15-year fixed rates are at 3.05%. These numbers are the result of nation-wide surveys collected from various lenders excluding fee-based reductions, known as “points,” which lower rates another percent per point purchased.
Not everyone is optimistic, however. Low mortgage rates are a sign of low rates everywhere, meaning interest rates on savings accounts, CDs, and other financial vehicles are equally rock-bottom low, earning next to nothing in positive interest. In fact, mortgage rates are often linked to the rates on 10-year Treasury notes (a type of government bond). In uncertain times, these bonds are seen as safe investments, and the more in demand they are (hence the more that are sold), the lower the rate of return. The efforts and manipulations made by the Federal Reserve are also troubling for many, as the weak dollar remains weak and inflation continues to rise. Coupled with a slow job market and stagnant wages among workers, the financial sector is a considerable concern.
With less money on hand, and less money to be made in the foreseeable future, the low rates might not have a considerable impact on the housing recovery. After all, rates have been steadily reaching ‘record’ lows for the past few years without sparking a glut of home sales. Lending restrictions remain tight and significant down payments are becoming the norm in order to achieve these optimal loans. Excellent credit scores are also increasingly essential to qualify for a mortgage loan. The tightening in requirements for these two factors (down payments and credit) could be reflected in the dropping average, as those who don’t possess these things are more frequently denied loans, allowing only the most optimal loans to enter into the averaging equation.
Overall, the mortgage rates are a mixed bag; while we can’t help but consider the negative circumstances, we also can’t help but be hopeful that buyers can and will take advantage of the long-term benefits that come with a good home at a great low rate. Other positive signs in the market include the best winter sales reports in five years and more new home construction in the works than we’ve seen in the past three years. So, if you are considering buying a home, shop your lenders to see if the record low rates can help make your dream a reality.
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