For the first time in 50 years, mortgage rates have fallen below 3%. Over the past several weeks, Freddie Mac has reported the average 30-year fixed mortgage rate dropping to record lows, all the way down below 3%. As a homebuyer, interest rates play an important role in how much house you can afford. When mortgage rates hit record low, a homebuyer’s purchasing power has increased significantly.
What Does This Mean For Buyers?
When mortgage rates hit record low, it is a huge incentive for homebuyers. Those currently taking advantage of the increasing affordability that comes with historically low interest rates are winning big. According to Sam Khater, Chief Economist at Freddie Mac:
“The summer is heating up as record low mortgage rates continue to spur homebuyer demand.”
In addition, move.com notes:
“Summer home buying season is off to a roaring start. As buyers flooded into the market, realtor.com® monthly traffic hit an all-time high of 86 million unique users in June 2020, breaking May’s record of 85 million unique users. Realtor.com® daily traffic also hit its highest level ever of 7 million unique users on June 25, signaling that despite the global pandemic buyers are ready to make a purchase.”
Lower Rates Mean More Buying Power
A lower monthly payment means savings that can add up significantly over the life of a home loan. With mortgage rates at record low, it also means that qualified buyers may be able to purchase more home for their money. Maybe that’s a bigger home than what they’d be able to afford at a higher rate, an increasingly desirable option considering the amount of time families are now spending at home given today’s health crisis.
Example of Increased Buying Power
THEN
$425,000
30 Year Fixed
4% Interest Rate / 4.109% APR
Principal and Interest = $2,029.02
NOW
$495,000 Loan Amount
30 Year Fixed
3% Interest Rate / 3.1 APR
Principal and Interest = $2,086.94
-or-
$510,000 Loan Amount
30 Year Fixed
2.75% Interest Rate / 2.848% APR
Principal and Interest = $2,082.03
That’s $70,000 – $85,000 more house for basically the same amount of principal and interest!
The Bottom Line
If you’re ready to buy a home, now is a great time to truly get more for your money at this historic moment. Low rates plus buying in a market that keeps appreciating…now that just makes good sense!
Let’s connect today to determine your best next steps toward homeownership while mortgage rates are historically low. We can also recommend a local lender in Bozeman Montana who can help you get pre-qualified.