Freddie Mac says the average rate on a 30-year loan recently dipped to 3.34%, the lowest on record since 1971.
The 15-year fixed mortgage rate has also dropped down from 2.69% to 2.65%, another new record. The rate on the 30-year loan has been below 4% all year and has fallen further since the Federal Reserve started buying mortgage bonds in September to prompt more borrowing and spending.
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The big question: are mortgages going to remain low through to 2013/14?
When looking ahead, you can see the direction of the U.S. economy, it is still stuck in its rut and far from a recovery. The European debt crisis is unresolved, and there is slower global economic growth.So, with the slow-growing economy and the Federal’s Reserve’s vow to keep mortgage rates low, it’s almost a certainty that they will remain the same or near record lows for the foreseeable future.
What does this mean for the buyers in Boston, Massachusetts? The best time for buying of course. Falling rates mark the best of times for buyers, and if you have been keeping an eye on the market, home prices have been falling for several years.
Potential home buyers may be encouraged to leave the sidelines and enter the market again.
And there is plenty of time. If buyers need an extra few months to improve their credit rating, they can. The higher your credit score, the more willing banks are to lend you money at a low rate. Prospective buyers with a great credit score may be able to get a mortgage rate that is a full percentage point lower than applicants with a just an OK credit score. And when looking for a home loan, your mortgage rate really matters.
A one-percentage-point difference in mortgage rates equates to a 10% difference in the monthly mortgage payments. On a standard 30-year fixed-rate mortgage, the monthly payment on a $200,000 loan would be:
- $955 for a 4% mortgage
- $1074 for a 5% mortgage.
That’s a monthly difference of $119.
Check your credit score.
It might be impossible to improve your credit score overnight, but there will be enough time to improve it, pay off debt or boost savings. Mortgage rates are not going up for potential buyers and neither are house prices in Massachusetts just yet.