Have you been waiting for the perfect time to take the plunge into home ownership? That time might just be now. America’s most popular mortgage, the 30-year, fixed-rate-option, has fallen to a record low average interest rate under 3%. Does that mean this is the right time for you to buy a new home? Let’s take a closer look at what it means.
The Situation As It Stands
2020 has been a year of extremes, and the real estate industry hasn’t escaped them. With lock-downs in many parts of the nation, and the pandemic raging around the world, properties haven’t been selling at the rate they were at the beginning of the year, or throughout 2019. In an attempt to spur economic growth and avoid a potential recession, the Fed slashed rates.
Currently, the average interest rate for a 30-year mortgage stands at 2.98%. That’s actually the seventh record low for 2020. In July, the rate was 3.07%. In June, it was even higher.
Of course, not all rates have dropped below the 3% threshold. Jumbo mortgage loans typically used to purchase high-end, luxury properties ($510,400 and up in most markets) have seen a dramatic reduction from 3.84% to 3.77%. That means while they haven’t become ultra-affordable, even affluent buyers can benefit from the rate reduction.
What does this mean, though? Will rates keep plunging? What good is it doing to reduce interest rates in the first place?
How Interest Rates Are Affecting the Real Estate Industry
The rate reductions offer a couple of important benefits. First and most obviously, the rate reductions allow homebuyers (including those looking to buy luxury properties) to lock in a much more affordable rate than would otherwise be possible. Even a modest reduction in interest could mean saving thousands of dollars over the life of the loan.
There is also the fact that interest rate reductions are pushing the industry toward faster growth, accelerating what would otherwise be a lagging market. According to the Mortgage Bankers Association, the weekly purchase index the week of July 16th was up by 15% year over year. That’s a significant amount of growth despite lingering concerns regarding COVID-19 and its impact on the economy.
Is It Time to Buy?
For many homeowners, this is the perfect time to buy a new home. With rates the lowest they’ve been in 50 years, this could be your opportunity to purchase the home of your dreams.