Although a lower interest rate can help you save money through the life of your home loan, the rate you obtain is based on certain factors. Some of these circumstances are within your control and others are not. One of the greatest elements within your control is creditworthiness and the reduction of risk to the lender. However, in general terms, interest rates are influenced by a number of economic factors such as inflation and employment.
During the COVID pandemic, the Fed bought billions of dollars of consumer mortgages to help keep rates extremely low and thereby encourage spending, but the key short-term interest rate is now being increased to help slow inflation. Furthermore, the recent strong jobs report has boosted the Fed’s drive for future rate hikes. Yet despite the recent rise in interest rates, mortgage rates have often been much higher than they are today. In fact, from a historical perspective, today’s mortgage rates are still well below average.
Over the last fifty years, average 30-year interest rates have averaged just under 8% and have varied from last year’s extreme low of less than 3% to double-digit highs of just under 17% in the 1980’s. In 1981, the highest recorded mortgage rate for 30-year fixed-rate mortgages was 18.45%, which certainly makes today’s rates compare very favorably.
Lower rates are generally offered for 10 or 15-year mortgages, but the shorter term means a higher payment, leaving many homebuyers unable to manage the larger monthly payments. Adjustable-rate mortgages may also provide an opportunity to save money on interest in the short term, but rate fluctuations can affect mortgage payment after the first five years.
It may be difficult to predict the future accurately, but it is likely there will be further rate hikes. Yet the important thing to remember is that mortgage rates do fluctuate. If rates rise, you will be happy that you bought your home when you were financially ready and could afford it, and alternatively if rates drop markedly, the mortgage can always be refinanced.
With over 110 lenders to choose from, 1 Stop Lending is contracted with some of the lowest-priced lenders in the nation and can provide all loan types and expert guidance for your real estate financing. When you’re making big financial decisions in your life like purchasing real estate, be sure to look for a professional who will offer honest and accurate advice that you can trust, while providing you with the outstanding service and support you deserve.
If you are interested in learning more, we are just one phone call, text or email away from answering any questions you have. Please visit https://1stoplending.net for more.