30-year fixed mortgage rates recently fell to their lowest level in six months. Would-be home buyers, sellers, and long-term home owners should all take note.
When it comes to real estate price fluctuations, buyers and sellers are on different sides of the market. A drop in mortgage rates, however, effects both buyers and sellers (and even people staying in their homes long-term) positively. Low mortgage rates can help you whether you are looking to buy a home, sell one, refinance a mortgage, or take out a home equity loan.
The catch is, you had better not drag your feet. These conditions cannot be expected to last.
Recent Mortgage Conditions
According to mortgage finance company Freddie Mac, 30-year fixed mortgage rates recently dropped to 4.21 percent, their lowest level since last November. 15-year rates dropped to 3.32 percent, and these also have not been lower since November. 30-year fixed mortgage rates are now 37 basis points below where they peaked last August - enough to make a significant difference to a monthly payment schedule.
That's the good news. The bad news is that these low mortgage rates may not stay around for long. Recent employment figures from the Bureau of Labor Statistics show that job growth has heated up over the past three months, averaging more than 237, 000 new jobs per month over that period after averaging just 190,000 over the past 12 months.
Low mortgage rates are very much a function of the economy's chronic weakness. If the job market is finally gaining momentum, it could be good news for the economy in general, but bad news for mortgage borrowers.
Implications for Buyers, Sellers, and Homeowners
Here's what this environment means for buyers, sellers and home owners:
- Home buyers should step up their searches. Between a dip in mortgage rates and some softness in real estate prices, this could be a good time to buy. Those conditions won't wait around for you though, so you need to approach your search with some sense of urgency.
- Home owners should look into refinancing. If you have not run the numbers through a home refinance calculator recently, now might be a good time. Refinance rates should look especially attractive if you got your mortgage prior to 2009, and have simply lacked the equity to refinance until now.
- Home owners might also consider home equity loans. If purchase and refinance rates have dipped, home equity loan rates should be relatively low right now as well. That could make this a cost-effective time to finance home improvement projects.
- Buyers and owners should consider shorter mortgages. 15-year rates are 89 basis points below 30-year fixed mortgage rates. If you can swing the higher payments that come with a shorter mortgage, a 15-year loan would allow you to take the fullest advantage of low mortgage rates. This might be an especially viable option for refinancing - not only should 15-year refinance rates be especially attractive compared to an existing 30-year loan, but if you have already paid some years off your original loan, shifting to a 15-year mortgage should result in less of a payment shock.
- Sellers should be prepared to hold firm on prices. As for sellers, you may not be in the market for a mortgage, but you could benefit from the recent dip in rates because low mortgage rates help drive housing demand. This comes at a good time, since there has been some recent concern that the housing recovery is losing steam. Don't be unrealistic about pricing your home, but don't feel you have to cave in too easily when negotiating. Between better weather and lower rates, you should see interest perk up in the weeks ahead.
Whether you are looking to buy, sell, refinance, or obtain a home equity loan, the message is two-fold. First, act decisively because mortgage conditions can change quickly. Second, because the market is so dynamic, expect rates to vary from lender to lender. If you shop around and compare mortgage quotes, you can take the greatest advantage of the recent dip in mortgage rates.