What’s happening with the current mortgage rates is always a hot topic among people who watch the markets: lenders, buyers and even the government. Buyers, especially, want to know if mortgage rates are going to rise or fall before getting locked in during the home buying process. The interest rate on a mortgage can affect the repayment amount significantly. Getting as low a rate as possible is the best option because it will lower the amount of monthly payments. A rise in mortgage rates affects indecisive buyers who wait too long to secure a mortgage. In the long run, those indecisive buyers end up paying back more on the total loan amount than those who locked in when interest rates were lower.
The 2012 Market
When taking a look at mortgage interest rates, most analysts refer to the 30-year fixed rate mortgage, which is the most common type home buyers use. Mortgage rates were looking good in September 2012, hitting lows of 3.7% for a 30-year fixed rate and saw only slight fluctuations around 0.4 points. Some analysts credited the lower rates to the start of a bond buying program by the Federal Reserve. In November 2012, rates dropped even further down to 3.31%, which was a record for the fixed 30-year loan. For even shorter loan terms, like a 15-year fixed loan, rates went as low as 2.63% and were so favorable that advisors were recommending home buyers jump at the opportunity to secure a mortgage, especially with the shorter-term loans.
The monthly cost of a mortgage payment can be significantly affected by mortgage rates. For example, a payment on a $200,000 loan that has a 4% interest rate means that homeowners will pay a total interest cost of $143,739. However, on a 30-year loan with a 3.31% interest rate, such as was seen in 2012, the monthly payment would cost homeowners only $877 a month, which would remove $221 a month from the repayment amount.
The 2013 Market
As of September 2013, mortgage rates started to creep upward as news spread that the Federal Reserve would cut its bond buying program. For example, in May 2013, rates hovered around 3.3%, but are currently sitting at about 4.5%. For home buyers who want to buy a home with an average $200,000 loan amount, that will mean paying an additional $132 a month for the life of a 30-year loan.
However, the most recent news was that the Federal Reserve will continue its program. As a result, it is expected that mortgage rates will start to slowly decline as the year draws to a close. Economic trends, demand and government movements all affect mortgage rates, which makes it important for potential home buyers to start looking at how things are progressing in the housing market before moving ahead.
Most experts advise waiting until mortgage rates are at their lowest percentage points before securing a home loan in order to get the best deal available for repayment. Over the span of 30 years, a few percentage points here and there add up and can add thousands of dollars each year onto the balance of the loan.