When the COVID-19 pandemic shuttered businesses and public spaces throughout the nation, many feared that the housing market would suffer along with the economy. But demand for homes has soared in the past few months—and record-breaking mortgage interest rates are largely responsible.
Mortgage Interest Rates Are Lower Than Ever
In March 2020, mortgage interest rates hit their first record low—but that was just the beginning. Since then, rates have climbed steadily downwards until reaching a new all-time low of just 2.88% for a 30-year fixed-rate mortgage, or 2.44% for a 15-year loan. The result? An influx in demand for houses in an already tight-inventory market.
Buyers are eager to save big
What exactly does a low interest rate do for a home buyer? In short, it saves you money. For example, let’s say you’ll be financing $200,000 of your home purchase. If you were to obtain a moderate 4% interest rate, you’d pay roughly $955 per month, or $11,460 annually, for your home (principal and interest). Compare that to a 2.88% loan—you’d pay just $830 per month, or $9,960 annually!
Lowering your interest rate just 1.12% saves you $125 every month, $1,500 annually, or $45,000 over 30 years! And that’s just with $200k financed. Want to know how much you might save at a different price or interest rate? Our mortgage calculator makes the math simple.
Inventory is also very low
Even before the pandemic struck, housing inventory was running low. During the height of the health crisis, many sellers chose to pull their homes from the market. But even though life is slowly regaining normalcy, many sellers are still hesitant to list. The result is very low inventory—in fact, some of the lowest levels on record.
For home sellers, this is fantastic news. For buyers, it could mean that finding the perfect home takes a little more time and a little more diligence. Getting preapproved for a mortgage is definitely essential if you want to stand out from the crowd and snag a good deal.
Purchase and refinance activity are up
Unsurprisingly, low interest rates have led to an influx in both home purchase applications and refinance applications. In fact, refinance rates are 84% higher than last year, while purchases are up 22%. However, tightened lending standards ensure that only buyers with the means to support their loans are able to buy, as under-qualified buying was a large driver behind the 2008 housing market crash.
Rates are expected to remain low
The Mortgage Bankers Association (MBA) expects interest rates to remain low. They were initially lowered to spur market activity, as well as to offer current homeowners relief during difficult financial times. They’ve certainly been effective in both measures; the market is surprisingly strong, despite the relative instability of the economy.
Are You Thinking About Making a Move?
Whether low interest rates have you considering a purchase or you’re planning to list your home to take advantage of low seller competition, Glazer’s Realtors is here to help. Contact us today to find out more about how we can ensure your goals aren’t just met—but exceeded.