Mortgage Rates Dip, Hover Around Record LowsNews
The 15-year fixed-rate mortgage reached a new all-time low this week, while the 30-year mortgage edged nearer to matching its record low, Freddie Mac reports in its weekly mortgage market survey.
The low mortgage rates are helping to push housing affordability to record highs. The National Association of REALTORS® reported this week that the average family has more than double the income needed to purchase a median-priced home.
Here’s a closer look at rates for the week ending March 8:
- 30-year fixed-rate mortgages: averaged 3.88 percent — only 0.01 percentage points above its previous all-time low. A year ago, 30-year rates averaged 4.88 percent.
- 15-year fixed-rate mortgages: averaged a new record low of 3.13 percent, with an average 0.8 point, dropping from last week’s 3.17 percent average. The previous record low for the 15-year mortgage was set in February when it reached 3.14 percent. Last year at this time, 15-year rates, a popular choice among refinancers, averaged 4.15 percent.
- 5-year adjustable-rate mortgages: averaged 2.81 percent, with an average 0.7 point, falling from last week’s 2.83 percent average. Last year at this time, 5-year ARMs averaged 3.73 percent.
- 1-year ARMs: averaged 2.73 percent this week, with an average 0.6 point, rising slightly from last week’s 2.72 percent average. A year ago at this time, 1-year ARMs averaged 3.21 percent.
I Could’ve Saved $38,000!News
In 1998, I purchased my very first home with an interest rate just over 7% and I was thrilled. It is a 2-unit, I still have it as an investment, and I refinanced just this past week to an non-owner-occupant rate of 4.5%. Being a numbers guy, I calculated that with no re-fis, I would have paid $96,353 in interest until now. If I’d had an original rate like I received this week, my to-date interest would have been $58,377. That’s a difference of $38 Grand!
When I think about it, it is astounding how great the buying climate is today for buyers. You’ve heard that home prices are at a long-time low, but money is also very cheap. This is a wicked combination! I’m focusing on interest rates only for this post. Here is a chart of interest rates, from when I personally started purchasing until now:
Bringing it Home
What does this mean for you, a buyer in today’s market? Here’s an example:
You qualify now for a $100,000 mortgage. All factors the same, we warp you back to 1998 with 7.1% interest rates. You are now qualified for a $77,000 purchase.
Lets modernize this. Say you qualify in Fall 2011 for a $100,000 mortgage at 4% interest. You wait awhile and interest rates go back up to 5.85%, a rate we saw a couple of years ago. You are now qualified for a purchase price of just over $85,000 with the same down payment and loan terms.
Lets flip it around:
You purchase a $100,000 home and put $3,000 down. Here’s how much interest you pay over the life of the 30 year loan:
7.1% (like 1998): $137,674
4.0% (like right now): $69,713
5.85% (like…the future): $109,007
$100k will get you this home in West Michigan, or one of many others:
Buyers, I have news for you: Now is the time!
Time to make a choice!
Pete Bruinsma is an Associate Broker at Grand Rapids Realty in West Michigan. © www.PeteBruinsma.com
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