Summary: Mortgage rates play a key role in determining how expensive your mortgage will be over the life of the loan. A low interest rate will mean you will be paying less in interest overall, making your mortgage more affordable. Conversely, a high interest rate will mean that more money will have to be paid towards interest over the life of the loan, making the mortgage more expensive.
That’s why today makes a potentially ideal time to buy a home. That’s because mortgage rates in WA, CO, ID, and OR are near historic lows. Rates have never been as low as they are right now, giving prospective home buyers the chance to lock in at very low rates and save tens of thousands of dollars (or more) on their mortgages.
- 30-year fixed-rate mortgages: 3.15%
- 15-year fixed-rate mortgages: 2.62%
- 5/1 adjustable-rate mortgages: 3.13%
Having said that, the exact mortgage rate that you are able to lock in at will depend on your credit and financial profile, loan-to-value ratio, and the mortgage company that you work with. All these factors will play a role in the precise interest rate that you get.
Mortgage Rate Trends
As mentioned, mortgage rates are extremely low, and they have been for many months. In fact, rates started on a decline since November 2018 and they have been steadily decreasing ever since. While there may have been the odd uptick here and there, the trend has been downward for a year-and-a-half, and it doesn’t look like this trend is going to change direction any time soon.
Factors Influencing Low Mortgage Rates
Mortgage rates have been declining for a few reasons. For starters, the Federal Reserve has been consistently keeping interest rates low. Over the last few meetings, the Fed has either decreased interest rates or kept them where they are.
The last meeting resulted in no change in the target federal funds rate range. Right now, it is between 0.00% to 0.25%.
The Fed Reserve doesn’t set mortgage interest rates, but rather determines the federal funds rate. This rate, in turn, affects short-term and adjustable interest rates. Lower costs can then be passed on to consumers with lower rates on some mortgages.
Economic uncertainty can also influence mortgage rates. And given today’s current health crisis, economic turmoil is certainly something that can keep rates low.
The coronavirus pandemic is having a major impact on the way rates are behaving today. The recent health crisis that is sweeping the nation has prompted some sellers to hold off on listing their homes and perhaps influenced some buyers to wait until things die down before continuing their home search.
As such, mortgage rates are being pulled down as the virus looms.
Having said that, the real estate market in places like Seattle, Portland, Denver, and Boise are still somewhat active, and these continued low rates are still giving buyers the push needed to get them into the market to capitalize on major savings.
Low Interest Rates Lead to Increase in Mortgage Applications
Every week, the Mortgage Bankers Association (MBA) puts out a survey that outlines the most recent mortgage activity. In its latest survey for the week of May 6, 2020, the MBA shows that mortgage applications increased from the week before, and are showing an upward trend.
Home purchase volume increased for the third straight week. Washington is one of the states in the nation that is leading the charge in the number of home purchase applications. According to the MBA, Washington’s week-over-week change over the past couple of weeks is as follows:
- Week ending May 1: 2.9% increase
- Week ending April 24: 16.1% increase
Mortgage refinances are also on the rise, according to the Refinance Index. While the index showed a 2% decrease from the previous week, it was a whopping 210% higher compared to the same week in 2019.
While the COVID-19 pandemic has certainly had a major impact on the housing market across the nation, demand among homebuyers is seemingly increasing. And the numbers from the MBA are backing this up.
There may be some pent-up demand among buyers who may have put their home buying process on pause during the first few weeks of the pandemic. But as the economy slowly starts to open back up and mortgage rates continue to hover near historic lows, new home purchases are subsequently on the horizon, sparking stronger mortgage application activity among Americans.
The Federal Housing Administration (FHA) also recorded an increase in mortgage applications over the past couple of weeks, as has the Department of Agriculture.
Is Now the Right Time to Buy a Home?
Whether you are considering buying a home in Washington, Idaho, Colorado, or Oregon, now might be a great time to make a home purchase. Given the extremely low interest rates available today, you’ll be able to save a great deal of money in interest. If rates rise at some point in the future, you’ll end up paying more in interest than you need to.
Let’s illustrate how just a 1% difference in interest rates makes in the cost of a mortgage. Assuming a $500,000 mortgage with a 30-year fixed-rate mortgage, we’ll compare today’s rate of 3.26% to a fictitious rate of 4.26%, which is 1% higher.
Based on these numbers, the amount of interest you would pay over a 30-year term would be:
- 3.26% interest: $282,194
- 4.26% interest: $382,615
That’s a difference of more than $100,000! As you can see, locking in at a low rate is very important, and you can do that by applying for a mortgage today. Just be sure to work with a trusted mortgage company that will work hard to get you a mortgage product with the most favorable terms and interest rates.
Ready to Apply For a Mortgage in WA, OR, CO, or ID?
Do you have questions about home loans? Are you ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest. Contact us today with any questions you have about mortgages.