I love finding the silver lining in things.
No matter how desperate a situation might look, there is almost always something positive, glimmering no matter how faintly, beneath the surface.
I have long postulated that the Federal Government’s stoppage of investment in mortgage-backed securities could result in rising interest rates. And I still believe that to be the case.
We seem, however, to have found a silvery lining in the specter of that cloud.
As you are likely aware, our friends in Europe are going through a bit of a financial crisis of their own. Greece is deeply in debt and has no earthly idea how to get out. The rest of the European Union doesn’t want to help them out, but Greece’s troubles are having a crippling effect on the, until now, untouchable Euro, whose value is dependent on the economies of all of the countries that use it.
The result? International investors, now wary of stockpiling their cash in European markets, have sent the U.S. an unexpected windfall in the form of mortgage rates that are now at near 50-year lows.
How low, do you ask?
Freddie Mac, on Friday, the 21st, said that rates averaged just 4.84% last week. Far from shabby, that’s the lowest since December 2009. In fact, I’ve heard reports of mortgage officers locking in loans with rates as low as 4.25% — fixed — which is as low a rate of which I’ve ever heard.
Did you miss out on the Homebuyer Tax Credit? As I mentioned a couple of weeks ago, it’s OK if you did. In the long run, that $8000 won’t take most people all that far. But a mortgage interest rate of below 5%? Now that is something that’ll save you some big money. A one-percentage-point decline in mortgage rates can save you hundreds of dollars each month. Over a 30-year period, that could translate into a lot of money. Real savings.
Also, lowered interest rates will increase buyers’ spending power. For each percentage point mortgage rates decline, buyers can spend about 10% more on a home. The extra bedroom or bump-out for which they’d been hoping might now be within their reach.
Take heed, though. It’s tougher now to qualify for a mortgage than it has ever been. Underwriting standards are tough. Not everyone is going to qualify, I’m afraid.
How long will things stay this way?
That’s a great question, and unfortunately one which has no answer. But I can tell you this: it’s unlikely that these rates will last for very long. If you have questions, contact your mortgage lender, your financial advisor, or your Intero real estate professional. They can point you in the right direction. If you’re looking to buy a home (or to refinance your current mortgage), it would seem that there is no time like the present.