Although this past week rates dipped down barely under 4.6%, they have steadily risen since May. Back in the second week of May in 2013, rates were at 3.6 percent. They have risen over a full point in the last 2 months, and while the rates are tied to the Fed's monetary policy, there seems to be little to suggest they will be down in the 3 percent range anytime soon. These rates are amazing, if you think about the fact that in the 70's and 80's rates were between 10-20 percent. And while we have nice low rates at the moment, as the economy improves those rates will go up. So what does all this mean, if your not a financial guru?
- You can afford more home with lower rates! With rates at 4.5 percent, you can buy more than at 6-7 percent.
IE: A 100,000 thousand dollar 30 year loan at a fixed rate of 4.5% with 3% down comes to with PMI - $794.00. Same 30 year fixed loan at 7% comes to with PMI- $948.00. That;s almost a 150 dollar difference. For a family of four that is groceries for a week, or gas for a car for the month. What would you do with the extra 150 dollars?
- Paying of the mortgage faster will earn you equity in your home much faster.
"The interest rate on a home-equity loan - although higher than that of a first mortgage - is much lower than on credit cards and other consumer loans. As such, the number-one reason consumers borrow against the value of their homes via a fixed-rate home equity loan isto pay off credit card balances (according to bankrate.com). Interest paid on a home-equity loan is also tax deductible." http://www.investopedia.com/articles/pf/05/041305.asp
- How high can the rates climb?
While it is unlikely that the rates will climb to the 20 percent range as seen in the 1980's, it is possible to see them move closer to the 9-10 percent range. While we are climbing out of the current Great Recession, there is no doubt that the Federal Reserve is worried about inflation. They did just influx trillions of dollars in cash into the US Economy. So inflation is definitely on there mind.
Remember rates are low, but they won't be their forever. Contact me to help you see what you can afford!
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