The Federal Reserve's Federal Open Market Committee met last week and Janet Yellen held her first press conference as Fed chair. According to the FOMC statement released after the meeting, the Fed cited severe winter weather conditions as a reason for slow economic growth in recent months.
Mortgage giant Freddie Mac regularly tracks and reports on average mortgage rates. Their most recent report, on May 12, 2016, notes that average rates have dipped to 3.57%. On the same date in 2015, they reported average rates of 3.85%–more than .25% higher. This a three-year low for mortgage rates.
Rates began moving consistently lower on December 30 of last year.
To put the improvement into perspective, a $300,000 loan in December of last year would have a monthly payment of around $1,406 for a 30-year term and a rate of 3.85%. Today, that same loan at 3.57% will have a monthly payment of $1,358—a drop of $48 per month.
While this may not seem like a lot of money, it represents a savings of more than $17,000 in interest over the loan’s term.
To put it another way, today’s lower interest rate means that the same monthly payment at the lower interest rate will buy $10,500 more home at the “starter” level.
What’s behind these historically low rates? Some believe, incorrectly, that the Federal Reserve sets the mortgage rates. In reality, a sluggish economic recovery has ironically helped keep mortgage rates low. You should keep in mind, however, that as rates move to such low levels, there are forces in the market trying to move them higher; in other words, the low rates won’t be here forever.
How can you get the most benefit from these rates? First, you should realize that they are not here to stay. Whether you are thinking about buying your first home, moving up to a different home or improving your financial position by refinancing into a lower rate, you should take steps now to lock in a historically low rate.
Apply now by clicking the button below. You’ll quickly be able to speak with a loan officer to discuss your next steps—but don’t wait too long, as rates can’t stay at record lows forever.