Friday, September 26, 2014

Interest Rates--Up or Not? What's Really Happening

Well, as many of you have likely heard over and over for the past year and change, interest rates in general--and mortgage rates in particular--were going to be heading up. Some experts predicted that by the end of 2014 mortgage rates would be at 5%, quite a bit higher than where they were last year. As you know, every time these rates climb, the cost to you of buying a home rises with them.  The house may cost a specific amount, but every penny you have to borrow to complete the purchase costs you more.  It's kind of like going to the grocery store--given today's supermarkets, that's a quaint notion--and on day 1 finding steak costs $8/pound; then returning for more steak on day 10 and finding the price has now gone up to $10/pound. Kind of spoils your apatite. Well, as the following information indicates, rates haven't gone up that far--in some cases had begun to do so and then dropped back down.
Good news for homebuyers: Interest rates for home loans continue to linger at historically low levels, extending a rare opportunity to get a mortgage at rates that can shave hundreds of thousands of dollars off payments over the life of the loan.Illustration of a house made of hundred-dollar bills
Bankers and economists last year had forecast mortgage rates to climb higher in 2014 and top 5 percent by the end of the year. But the reverse happened, and rates today on a 30-year mortgage are nearly one-half of a percentage point lower than where they stood a year earlier.
Today’s low rates give another chance at home ownership to Bay Area residents who were outbid on properties during the frenzied real estate scene of 2013 and early 2014.
Since then, the number of all-cash investors has dropped significantly and the supply of homes on the market has gradually expanded — both signaling new opportunities, especially for first-time buyers.
Freddie Mac reported late last week that 30-year fixed-rate mortgages averaged 4.12 percent, down from 4.57 percent last year at this time, and 15-year fixed-rate mortgages averaged 3.26 percent, down from 3.59 percent one year ago.
Surprisingly, mortgage rates aren’t too much higher than when they fell to a record low of 3.31 percent in November 2012. By comparison, mortgage rates averaged 7 to 9 percent in the 1990s and 10 percent in the ’80s.
Last year, Pacific Union explained how rising mortgage rates can add hundreds of thousands of dollars to total house payments over the life of a loan.
Even with increasing home prices, buyers who take advantage of today’s low mortgage rates can still find a bargain. But it’s a wise move to act fast. How long these low rates will linger is a question that even bankers and economists cannot reliably answer.
So, where will the mortgage rates go from here? Well, it is a safe bet that at some point, they will again begin to rise and possibly hit the 5% level.  The question is when and how quickly.  As to decisions about buying or refinancing your home, the current wisdom is to not waste too much time in getting your loan approved. Better to lock in today's rates than to wait for next year and find you cost yourself hundreds if not thousands of Dollars every month on your payments.
Need help in valuing your home or understanding what both the real estate and mortgage markets are doing? Call us! We can handle all of your needs from valuations of your home to finding your next one to getting connected with the best experts in the mortgage market. Peter: (415) 279-6466; Jane: (415) 531-4091.


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