First-Time Homebuyers Get a Break With Lower Mortgage Rates
(TNS)—Economic gurus got one part of the mortgage forecast for 2019 correct. We’re certainly seeing a volatile year for rates.
What they didn’t see coming: Mortgage rates tumbled in March, the biggest one-week fall in a decade. Now—instead of seeing mortgage rates edge closer to 5.25 percent, as some had predicted we’d see in 2019—we’re looking at an average 30-year rate near 4 percent.
The rate drop comes just in time for the spring home-buying season and will make monthly payments less expensive.
“This drop in rates is going to give the housing market a boost,” says Bill Banfield, executive vice president of Capital Markets for Quicken Loans. “It could help to make people come back into the market and consider buying a home.”
Mortgage rates have fallen by a full percentage point since late 2018. Going back four months or so, most forecasts weren’t expecting mortgage rates to drop as low as 4 percent for borrowers, Banfield says.
“This is a surprise to a lot of people,” Banfield says.
The average 30-year rate was 4.1 percent as of late March, the lowest rate since Jan. 2018, according to Bankrate.com data. But rates started to rebound a bit upward in early April. The average 30-year rate went back to 4.29 percent as of April 3, according to Bankrate.com.
By contrast, the average mortgage rate was 5.1 percent as recently as mid-November, which was a seven-year high, according to Bankrate.com. The average was hovering around 4.75 percent as 2018 drew to a close.
We’re talking about some real money here for homebuyers. Take a $200,000 mortgage. The mortgage payment for principal and interest would drop by about $120 a month if your rate is 4.1 percent instead of 5.1 percent on a 30-year mortgage, according to Greg McBride, chief financial analyst for Bankrate.com. For the mortgage alone, the payment would be about $966 month at the 4.1 percent rate. It’s sort of like getting more than one month free each year.
For a homebuyer who was priced out of the market last spring, the lower rates could help get them back in the game.
Being able to lock in a 30-year fixed rate near, or even below, 4 percent helps put some “wind in the sails of home buyers from an affordability standpoint,” McBride says.
The 30-year fixed rate mortgage remains the dominant loan for middle-class borrowers, particularly first-time home buyers.
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Stacy Schnell Real