Yesterday and Today: What Low Interest Rates Actually Mean
One of the phrases companies love to use right now is “historically low rates” (guilty!), but what does that actually mean? Is it just lip service getting people intrigued or is there more to it than that? We took a look back at the last 30 years of data to show you what exactly goes into the phrase we all love so much.
Tracking the Rates
Starting in 1971 Freddie Mac, a government-sponsored enterprise, started actively tracking mortgage interest rates. To track the rates, Freddie Mac aggregates rates from about 80 lenders across the country to come up with weekly national average mortgage rates. The rates used are typically those of borrowers with strong credit scores and large down-payments. This means that these rates tend to be among the lowest available and will not apply to every borrower in every situation.
Looking at the rates from the start of the tracking you can see that there have been some large fluctuations, especially in times of recession. Since a high in the 1980s of rates in the high teens, they have been dropping steadily on average. Looking at the graph below you can see those trends in action.
Where are we now? Where are we headed?
2020 has been quite the year… In so many ways. One way we keep seeing the year 2020 surprise us is with new record breaking mortgage rates every month. Last month the national average rate was a record low 2.98%, however, that record was quickly beaten this month with an average rate of 2.88%. There is no way to know for sure what will happen in the coming months, but there are plenty of predictions pointing toward a new low coming.
What does this mean for me?
I’m sure you have heard it before, but with these rates there is no better time to purchase a new home or refinance your current one. If you are thinking about purchasing a home, whether it is your first home, an upsize or a downsize… Now is the time to act. The low rates mean your dollar will stretch further and you may be able to afford more than you think or find that dream retirement home you have been longing for. If you already own a home that you plan to stay in, looking to a refinance for monthly savings may be the way to go. To help you visualize what you can afford or how much you can save, we have added two new calculators to our arsenal:
Wherever you find yourself on the housing road map, now is the time to act. Nothing is certain, especially in 2020, and locking in a low rate now will benefit you for years to come. Connect with a Cambria Mortgage professional to review your calculations and options today!