Last month the Fed announced that it would begin a massive round of bond buying. The news spurred a drop in home interest rates. Thirty-year fixed loans now average 4.34%. This marks the lowest points for interest rates in a year, and a drop of 19 basis points from a year ago. Could falling interest rates make this the right time to buy a home? Here’s what you need to know.
Mortgage Interest Rates: A Quick Guide
Your mortgage interest rate is the amount of interest you pay on a home loan. Because the amounts people borrow are so large, even a small drop in interest can have significant effects on the overall cost of home ownership.
The overall economy sets rate norms and averages. The rate for which you are eligible is built around these norms, but depends on factors such as:
- The lender you choose
- Your creditworthiness
- The amount of your down payment
- The condition of the home you choose
While a drop in the mortgage rate likely means a drop in the rate you will pay, other factors matter just as much. If you’re very creditworthy or otherwise well-prepared to purchase a home, a drop in rates could make this the right time to make a home investment.
How Mortgage Interest Rates Affect the Home Market
As rates drop, the availability of loans increases. That means that people are able to afford larger loans, and that more people gain access to the possibility of home ownership. Taken together, this can mean a shortage of available properties. Property values may rise as interest rates drop because people can afford to pay more for their homes, and fewer homes become available. In this regard, dropping interest rates benefit both buyers and sellers, but can make it more difficult for buyers to find the home of their dreams.
Right now, buyers can still find excellent homes at relatively affordable prices. As interest rates drop, home values may continue to rise. This makes now a prime time to invest. You can buy your home at a relatively low price, then sit back comfortably and watch its value soar. As the economy and your needs change, your house can become a valuable investment that you can eventually sell for a tidy profit.
Is Now the Time to Buy?
Buying a home can be an intimidating experience, whether this is your first home or your fifth. You might wonder how the market will shift with time, whether you can afford your next home, and how to weigh the value of your home investment. These concerns are natural, and a sign that you take this important investment seriously.
Most analysts think interest rates will continue to drop. This means that home availability could drop, driving higher prices and less access to great homes. If you think you’re ready to buy a home, now could be the best possible time to do so. Today’s economy marks the perfect combination of low interest rates and rising home values, especially in Texas. So take the plunge. We’d love to help you choose the home of your dreams. Give us a call or send us an email to find the perfect home for your family. Want to see what is available now – take a tour of homes that are ready now at MorningStar.