The Drop in Mortgage Rates Brings Good News for Homebuyers

Over the past few weeks, the average 30-year fixed mortgage rate from Freddie Mac fell by half a percent. The drop happened over concerns about a potential recession. And since mortgage rates have risen dramatically this year, homebuyers across the country should see this decline as welcome news.

Freddie Mac reports that the average 30-year rate was down to 5.30% from 5.81% two weeks prior (see graph below):

The Drop in Mortgage Rates Brings Good News for Homebuyers | Keeping Current MattersBut why is this recent dip such good news for homebuyers? As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), explains:

“According to Freddie Mac, the 30-year fixed mortgage rate dropped sharply by 40 basis points to 5.3 percent. . . . As
a result, home buying is about 5 percent more affordable than a week
ago. This translates to about $100 less every month on a mortgage
payment.”

That’s because when rates go up (as they have for the majority of
this year), they impact how much you’ll pay in your monthly mortgage
payment, which directly affects how much you can comfortably afford. The
inverse is also true. A decrease in mortgage rates means an increase in your purchasing power.

The chart below shows how a half-point, or even a quarter-point, change in mortgage rates can impact your monthly payment:

Bottom Line

If your home doesn’t meet your needs, this may be the opportunity
you’ve been waiting for. Contact a local real estate advisor today to
see how you can benefit from the current drop in mortgage rates.

Source: KeepingCurrentMatters

Posted by Kodak Hensley on
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