The trend for the last several months has been a decline in mortgage interest rates. While there was a spike in mid-March, the rates have reached as low as 3.31% at the time of this article. Below are some important questions to consider.
Why are rates declining?
There are two major reasons to this. First, the Fed’s cutting their rates has allowed mortgage lenders to respond in kind. The efforts by both parties were efforts to stave off a recession and encourage market activity. Secondly, rates have dropped because the bottoming out of the economy related to the COVID-19 pandemic.
How does this impact buyers and sellers?
The biggest impact is simple, the dollars can go further. Low rates, means purchasing power for home buyers is greater and would hopefully entice more buyers to the market. Additionally, lower rates will entice current homeowners to explore refinancing opportunities.
What is really happening with the market?
According to Freddie Mac, refinancing activity has not slowed at all. With that said, home purchasing demand has with an economy in a weakened state. A year ago, many experts were predicting some lag on the horizon, but not to the current state affairs and certainly not via this catalyst.
Other news and notes?
Mortgage products are not one-size-fits-all, and this means that the rates we are seeing at all-time lows are not applicable to all of these products. For example, FHA loans are not as easily accessible as they may have been a month ago. Lenders view the consumers of these products as higher risk clients, and therefore have tightened some of the restrictions associated with these. The rate on these often is a little higher. Jumbo and renovation loans are very difficult to obtain with the current high levels of uncertainty.
Is now a good time to buy or sell?
More than ever, the answer is really a case-by-case situation. While home prices once again went up in March and the inventory maintained the trend of being low, there may be an upcoming buyer’s market. Sellers that are currently active may be looking to enter an agreement sooner than later to ensure they have a contract in place prior to potentially more economic woes. This offers some leverage to those buyers who are stable in their position. With that leverage and low interest rates, it is not a radical idea to begin a new home search. Just be ready to go about that in a more virtual way than traditionally, but. more on that in another article.