I have to admit something right from the get-go. Yes, I am aware that interest rates have been steadily declining. In fact, earlier this year, one of my buyers asked me if they should lock in their rate. My reply? “Wait. I think they are coming down some more.” I love it when I’m right.
However, here is what caught me off guard. This week, rates hit a three-year low. How did I miss this? Come to find out, even traders in the bond market were amazed by the swiftness of the slide.
Who Benefits from Lower Interest Rates?
Three Distinct Groups of People.
Group 1: Buyers
In one year, mortgage interest rates have dropped about 1%. What does that mean? Scott Sheldon of New American Funding explains. “People are getting about $35,000 to $40,000 of extra spending power.” Think of it this way, a buyer who could only consider a $265,000 house can now dream about a $300,000 home.
Furthermore, consumers are now more optimistic about buying a home than they were a year ago. Why? Three reasons:
- A strong job market
- Lower mortgage rates
- Security in the economy
Group 2: Sellers
Let me identify the obvious. Not only can buyers afford more house but there are a whole new group of potential buyers who did not exist a year ago!
This is reflected in the Home Purchase Sentiment Index. It rose to a new high of 93.7 in July, up 2.2 points over the previous month. Sellers are benefiting from the fresh optimism among buyers.
Group 3: Homeowners Wanting to Refinance
The question some homeowners are now asking is simple, “Is now a good time to refinance?” My reply? “It could. Let me have you talk with a lender I trust.”
I can, however, provide two examples. First, one homeowner had 16 years left on their 20-year mortgage. They refinanced into another 20-year, dropped their private mortgage insurance (PMI) and are saving an additional $105.00 a month. Second, a second 20-year mortgage holder refinanced into a 15-year for smaller savings but with two years bumped off their loan.
There are obviously more examples. After all, the volume of refinancing applications increased 112% from a year ago according to the Mortgage Bankers Association.
How long will lower interest rates last? No one knows for sure. But, if you have found a home you want, then you may want to heed the advice of Mitch Ohlbaum, a Los Angeles loan officer. “If you have the opportunity, I would lock in a mortgage rate within the next 48 hours.”
If you find yourself interested in pursuing more information, please contact me here:https://ivystantonhomes.com/contact-us/ I would love to help you out.