HOME LOAN MORTGAGE RATE CONTINUES TO FALL

The continued fall of interest rates on home loans is baffling industry experts. The current rates defy all previous predictions, and continue to go down in spite of already extreme lows. For the last two months, interest rates on home loans have been at historic lows. Even a brief upswing in mid-February only threatened that all-time low average before turning around and going back down.

Many of the nation’s leading economists were amazed to see rates fall into the 3% range and remain at that level consistently for weeks, moving down at a steady pace to the lower range of that percent. The end of last week was the 19th week of straight decreases in interest rates below 4%. What was more amazing still was that in that week, the rates for 15 year conventional mortgages breached the 3% mark and hit 2.97% for the first time in recorded history.

This is great news for both home buyers and home sellers, and creates a powerful housing market. These new low rates, reported by industry leader Freddie Mac in their weekly rate survey, offer buyers the opportunity to buy better homes. A lower interest rate means more buying power. Home buyers who could only afford a $200,000 this time last year, can now afford to buy a home worth $222,000.

Interest rates at the lowest level in 24 months offer home buyers the ability to purchase bigger and better homes. The difference in mortgage interest in just one year means an 11% difference in the buying power for those looking for real estate.

It also means home owners have a stronger market to sell to. Their homes are worth more and they can begin to think about moving up to a bigger home if desired. Low interest rates also give home owners a great opportunity to refinance and make improvements or get the money they need for other necessities. Lower costs and higher home values also lifts many homes out of the serious underwater difficulties of the past that many experienced, and puts them in a more favorable position for refinancing.

Home owners looking to refinance find themselves “in the money.” This is a common real estate term for having enough value in the home to get money out of it, either through sale or refinance. Many of today’s home owners who purchased a home in the last decade have the opportunity to refinance at a rate that is 150 basis points lower than their original home loan. That’s a savings of at least 1.5% in just interest rates alone.

On average, a typical refinance can save a home owner 30% every year. Some can get even more savings if they qualify for VA or FHA loan programs. Streamline programs from both the VA and FHA even make refinancing less stressful and far faster than a conventional refinance.

This is the time for all home owners to seriously examine their options and get some relief from high interest rate mortgage costs.

AVERAGE INTEREST RATE ON 30-YEAR HOME LOANS AT 3.68%

While home owners can get better deals on shorter term loans, or find great deals in federal programs, the 30-year conventional loan still remains the ‘gold standard’ in the mortgage industry. Many reports are centered around what the figures presented by that loan type offer, because home owners still opt for that loan style most often.

Even with the best home loan rates available, prime borrowers need to pay 0.6 points at closing. Known as discount points, these pre-paid interest payments are a onetime cost that brings down the total interest rate on a loan. One point at closing is equal to 1% of the total loan value. For instance, one point on a loan of $417,000 would equal $4,170 at closing.

The upside of paying down an interest rate is that discount points are usually tax deductible. For an even easier way of paying them, some lenders will even wrap up closing points in the total loan size, giving you the ability to pay it off as a loan.

For even better loan values, home buyers and home owners refinancing their loans should consider a 15-year mortgage. Interest rates are at all time lows for 15 year mortgages, with rates in the 2.97% range with just 0.6 discount points at closing. Home owners can save both on the amount of interest paid, and with a shorter term of payments, that also means less interest paid over time for huge savings in the long run.

These figures are all based on the weekly mortgage interest rate survey put out by Freddie Mac and apply to conforming and conventional mortgage loans. FHA, USDA and VA rates are not a part of the report. Volume for these types of loans are skyrocketing as home owners and home buyers take advantage of the great offers.

APRIL INTEREST RATES

Mortgage rates for home loans remain well below the strategically and psychologically powerful 4% area. In the early days of 2015, rates for a 30 year conventional mortgage were at all time lows of 3.87% which were phenomenal. More important, the rates had fallen below what are perceived as prime value 4% ranges. Today, however, rates are even better. The average home loan interest rate is 3.68% for a standard 30-year loan.

MORE JOBS EQUAL A STRONGER ECONOMY AND BETTER RATES

The February Non-Farm Payroll report which is the signpost for economists showed a total of 295,000 new jobs overall. That is a continued rise in a 13 month period, which means a strengthening economy. This powerful upswing has given new life to the mortgage industry by pushing down interest rates and opening up availability to new home buyers.

LOW INFLATION

As an added bonus, the Federal Reserve has noted that inflation rates have remained low, giving more value to the dollar, and more buying power to home owners and home buyers.

A combination of low inflation and strong economy makes the real estate market a good bet for future investments once again. Mortgage bonds have long been one of the safest investments on a global scale. When mortgage backed securities are strong, it is the home buyers and home owners wishing to refinance who truly benefit. A secure MBS (mortgage backed securities) industry means more accessibility to conventional loan programs.

 

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