The Rates Are Dropping! The Rates Are Dropping!

Interest rates have dropped, and when interest rates change they directly impact home buyers and sellers.  

Why did the interest rates drop?

At the end of October, interest rates dropped .25% to approximately 4.0% on a typical 30 year fixed mortgage.  The rates decreased due to the recent downturn of the stock market.  Once the market recovers, you will see the interest rates go back up to 4.25% – 4.35%. 

How much longer can we expect to see these historical low rates?

Mortgage interest rates will stay low as long as the economy is sluggish and inflation is low.  The feds have kept the base lending limit at 0% much longer than it was anticipated, which has kept mortgage interest rates lower.  This is partially due to the recovery of the economy after the Great Recession.  Although our politicians boast how well the economy is doing, from a personal experience, I see a lot of families still going through financial stress.  Once we see two or three consecutive quarters of economic growth, you will begin hearing rumors about the feds increasing the base interest rate.  Once the base interest rate increases, mortgage interest rates will also go up.

What do lower interest rates mean to you as a homeowner?

If interest rates increase, the average home buyer will not be able to purchase the same maximum loan amount and will have to lower their purchase price.  This could possibly mean the average home value decreasing slightly.