Mortgage rates are setting records

Buying a house right now is very attractive, you're hearing how great of a time it is to buy, but why is this so? In the last two weeks mortgage rates have sunk to historic lows. A low mortgage rate means you spend a lot less money for the same house, and this is because the interest on your loan will be low. A mortgage rate is the interest rate charged on a mortgage. If you're looking to purchase a house, this is great news for you. I'm going to explain why that is true in this blog.

Recently, the average U.S. mortgage rates for a 30-year loan dropped to 3.83 percent. A 15-year mortgage, commonly used for refinancing a home mortgage, dropped to 3.03 percent. Both of these numbers set a low interest rate record for recent times, and it is the second week to do so. To put this in perspective, last year at this time the interest rate on a 30 year mortgage was 4.63 percent. This translates into an increase of nearly 1% of interest for the same house.

What is the reason for this

Mortgage rates are set low to encourage a comeback in the housing industry based on these factors:

1. Mortgage rates normally track the yield on the 10-year Treasury note.
2. The employment rate is down - fewer people with jobs means fewer buyers for homes on the market.
3. US Mortgage Backed Securities (MBS’s) are considered the quality investment with the European turmoil in Greece, Spain etc. This high demand is driving the price of MBS’s up and the yield/rate down; a ‘Flight to Quality’ to the US MBS market.
4. With home prices down, those who can afford a house may be concerned about entering the market right now.

What this means for you

On May 9th, the National Association of Realtors reported that prices for single-family homes were increasing in the first quarter in 74 of 146 metro areas. Increasing home prices is usually a good sign. By the end of March, 22 percent fewer homes were for sale than the same time last year, and home sales rose 5.3 percent in the first quarter. Prices of houses are the lowest they've been in years, and although they are rising, the mortgage rates are not. This is why it is the perfect time to buy.

In this economy, the last thing you're being told to do is spend money. Most of the time not spending would be a good practice, but when you think about the current situation based on all the factors you will see it is the time to buy. Take advantage of these low rates. Contact me here and we will get you into the house you desire.