Real Estate

5 Week Dip in Mortgage Rates Goes Against Freddie Mac Forecasts (For Now)

A few days ago we talked up 30 year mortgage interest rates dropping further. The news continues as rates adjusted even lower this week. It’s the 5th week in a row that rates have fallen.

“Mortgage interest rates were forecast to be rising early this year in response to the Fed’s increase of the Federal funds interest rate in December 2015.  The Fed has even said they’re going to be doing another rates increase in March,” said Gerard DiRuggiero, Principal Broker of UrbanLand Company. “This is a great surprise to home shoppers looking to make their first home or condo buy. Rates right now are at just 3.72%.

Under 4% interest rates is a big deal. The lowest rates have ever been historically was a 3.31% interest rate in November of 2012. The current 3.72% is the lowest rate since April of 2015.  Back in 1981, interest rates were a catastrophic 18.45% for home buyers. That means, if you’re a certain age, your parents would have been paying the same interest rate on their home loan that people today pay for a ‘predatory used car loan for those with terrible credit’.

The average cost of a home in 1981 was $82,500 in the USA. At that 18.45% rate, the monthly payment after 20% down would be $1.019 (or $2,500+ today after inflation). 82% of your monthly payment went towards loan interest over your 30 year mortgage term.

Things are in stark contrast today. At an interest rate between 4% and 5%, which is higher than today’s 3.72%, the numbers look far easier to swallow. “Average costs of a home today are $322,700. With 20% down, the 30 year mortgage monthly payment is just $1,247 in today’s dollars. Only 43% of your total mortgage payments go towards interest over the 30 years,” continued DiRuggiero.

What’s the conclusion? 2016 (right now) is a great time to buy your first home or condo. Even when rates go up to the forecast 5% interest rate that will occur someday, you’re still in far better shape than the 1980s!

Tuesday-Workshop-Graphic Saturday-Workshop-Graphic

UrbanLand Company Free Home Buyer Workshops are every Tuesday at 5;30pm and every Saturday morning at 10am. Location is 913 Florida Ave. NW. Space can be limited – make sure you RSVP! These are Free Workshops that produce happy homeowners!

Full February Calendar is available here.

Skip to toolbar
Tools Fast Help