A steady housing market is one of the biggest keys to a thriving economy. Unfortunately, home sales have been lagging behind historic numbers in the last few months despite a strong job market. The main reason houses are remaining unsold is due to potential buyers getting priced out of the market by high-interest rates. Luckily, it looks like this problem will be nonexistent very soon.
The average interest rates on a mortgage just saw their largest one-week drop in more than 10 years. It is now possible to get a new 30-year mortgage with a fixed interest rate of just over four percent. The rates are even lower if the home buyer opts for a 15-year mortgage. This is a very encouraging sign for the housing market because mortgage rates were above five percent only six months ago.
It is very easy to see why this drop in mortgage rates is extremely important when analyzing the numbers. The one-percent drop in interest rates in the last six months will save a new homeowner over $100 on their monthly mortgage payment when buying a $200,000 house. It will also save them more than $43,000 over the course of a typical 30-year fixed rate mortgage. These numbers become even more dramatic as the purchase price of the home goes up.
The lower monthly mortgage payment is exactly what many potential home buyers need in order to afford their dream house. This means that thousands of people throughout the country will buy their first house instead of extending their rental lease for another year.
The dropping mortgage rates can also help a lot of current homeowners. It is the perfect time to refinance for anyone that bought a new house last year. Refinancing at a lower interest rate lets them save big on their upcoming mortgage payments. This process is extremely easy, so there is no reason to get stuck with abnormally high mortgage rates.
The best thing about the recent drop in mortgage rates is that it is happening at the perfect time. Spring is always the busiest time for real estate sales because the weather is finally getting warm. It is only a matter of time before home sales skyrocket, which is exactly what the housing market and the economy need right now.