Mortgage Rates are Still at Record Lows

Mortgage Rate Changes

If you own one of the Davie homes for sale, you’re probably feeling good that prices are inching up and sales prices are staying close to asking prices. If you would like to buy a home in Davie or elsewhere in Broward County, you should also be feeling good because mortgage rates keep hitting all-time lows in 2020.

Mortgage Rates Dropped Early in 2019

The COVID-19 pandemic hurt a lot of people and businesses, but it also had a big impact on interest rates. If you look at this chart, you’ll see that according to Freddie Mac, interest rates started to fall right around when COVID-19 started to make an impact in the U.S.

On September 10, 2020, the rate for a 30-year fixed mortgage was 2.86%. If you talk to mortgage lenders, they’ll probably tell you that they never thought they’d be quoting rates that low. Keep in mind that not everyone will get a rate reported by organizations like Freddie Mac. You’d need excellent credit and a 20% down payment to get the lowest rate offered on any given day.

What Difference Does a Point Make?

A 1% difference in the interest rate does make a difference. For example, if you financed $200,000 on a 30-year fixed mortgage, at 3.5%, your monthly payment would be $898.09. At 4.5%, your payment would go up about $115 per month to $1013.37.

The big difference comes in how much interest you’d pay over the life of the loan. At 3.5%, you’d pay $123,312 and at 4.5%, you’d pay $164,814 in interest over the life of the loan. It’s true that the majority of people don’t live in one house for 30 years. But, if you finance all the homes you purchase at the same or a higher interest rate, you still end up paying at least that higher interest over 30 years.

If your existing mortgage interest rate is high, this might be an excellent time to refinance. For example, if you purchased your home in November 2018, for example, your mortgage rate was more like 5%.

Where are Mortgage Rates Going?

Admittedly, we’re in a unique economic situation. And, in any economy, forecasting what will happen to interest rates is more of an art than a science. Here are some things to consider.

Down Below Zero?

You may think that the best news is that interest rates are heading toward 0% or even negative interest. Some countries have seen negative interest rates, but there are unintended consequences.

It would be exciting if your mortgage had a negative interest rate. That would mean that over the life of the loan, you’d end up paying less than what you borrowed. The same would be true for your car loan and any other loan you get from a bank. But, typically, a country would only use negative interest rates as a last ditch, desperate measure.

Mortgage Rate ChangesThink about the effect of negative interest rates from the savings side of the equation. Rather than interest-bearing accounts, banks would have interest-charging accounts. That means you’d need to pay the bank to hold your money, which isn’t something any of us are accustomed to. The only way you could earn money on your bank funds would be to take out a loan. It sounds like we’d fall down the rabbit hole where everything is the opposite of what it should be!

A negative interest rate strategy could backfire. For example, if banks must pay borrowers for the privilege of giving them a mortgage, the odds are banks will be less likely to give people mortgages, or any type of loan. That could have a devastating effect on our economy. And, rather than paying the bank to hold their money, some people may go back to hoarding their cash under the mattress, which would remove assets from the economy and further stifle lending and economic growth.

Stay Relatively Steady?

This seems the more likely scenario. Of the experts at Bankrate, 9% predict rates will rise, 91% predict rates will stay steady, and no expert thought rates would fall.

The Home Buying Institute also predicts that interest rates would stay low through the first half of 2021. But, keep in mind that all forecasts are just educated guesses.

If you’re thinking of refinancing, you should know that Fannie Mae and Freddie Mac announced that they will apply a .5% fee to most refinances, and experts say that in October, lenders will begin to raise refinance rates to account for the fee.

It’s a crazy time for the country, real estate, and interest rates, but if you work with professional Davie Florida Realtors like those at the Teri Arbogast Team, you’ll get the advice that will help you make informed decisions about your next real estate transaction.

Whether you’re selling or buying in Davie Florida or other County locations, we are ready to help. Take a look at our Google reviews, and you’ll see that our clients have lots of good things to say. We’re very proud of our five-star ratings on Google, Zillow, and other real estate review websites. We’d love to make you our next successful client!  Call us at 954-242-8030 or send an email today.

Teri Arbogast Team Davie FL