With everything that’s going on, we can always afford to find some bright spots.
The stock market is at lower levels than when the year started. Unemployment in the wake of the COVID-19 pandemic has exploded.
But there’s one area where things are a little slower to develop—and that can be good news for anyone looking for a mortgage.
Interest rates, in a word, are low.
These days, people looking to lock in a low-interest rate are in luck. Because interest rates are so low, mortgages aren’t so expensive. That means people looking to lock in an affordable fixed rate on their housing might be in luck.
Fixed-Rate Mortgages Rates: A Historical Perspective
Just how do today’s rates compare to rates in the past? You’d be surprised.
In 1977, the average fixed-rate mortgage included interest rates of about 8.7%, according to data from Freddie Mac (https://t.e2ma.net/click/8s3efs/0ejvwee/0ur0qnf) .
30-year fixed rates then peaked in the early 1980s (https://t.e2ma.net/click/8s3efs/0ejvwee/gns0qnf) , with an average of over 16%.
These days, it’s not unusual to see fixed-rate mortgages available at 4.5%–and much lower. In some cases, mortgage rates are in the 3-4% range.
Is it possible interest rates will continue to plunge?
Of course. The economy isn’t so easy to predict that we can say definitively that rates are about to go up.
But locking in a fixed-rate mortgage at the current interest rates isn’t going to be a bad idea even if interest rates keep going down.
Refinancing In Difficult Economic Circumstances
These days, house prices are a bit slow to react to the changing economic circumstances.
What’s going on? One reason is that while demand for new homes may be down as fewer people are going outside for showings, there’s also a decrease in supply.
In other words, there are fewer available homes on the market.
That means that many people are looking to stay where they are. And for anyone who likes where they are, lower interest rates can be an easy way to save money every month.
If you don’t want to move, applying for refinancing means that you can take advantage of these lower interest rates. You’ll have more wiggle room in your budget with lower rates, even though the quality of your housing won’t change.
Tips for Taking Advantage of Low Mortgage Rates
If available, go for a fixed rate. A fixed-rate means that no matter what happens to interest rates down the line, you’ll still have a reliable payment to make every month. Adjustable-rate mortgages can be riskier, but they often come with lower payments.
Shop around. Your mortgage is essentially a product. And since it’s one of the most expensive things you’ll ever purchase, it only makes sense to shop around for the best rates. Even shaving 0.1% from a mortgage can yield tremendous long-term savings.
Is now a good time for a fixed-rate mortgage? With rates low, it may make sense for you to refinance—or maybe make your first home purchase. But keep in mind that even if rates go lower from here, it doesn’t mean you made a bad decision. In fact, it may be one of the better decisions you make for your long-term financial stability.