So you may not have noticed, but this week has been pretty volatile for mortgage rates. We saw record lows on Monday, and then rates started to go up on Tuesday.
It seems as if the cause of that is a combination of the Coronovirus fears, the stock market’s reaction to it, and the refi market’s reaction to that.
It’s unclear what single factor directly affects mortgage rates, but its not hard to look to see what’s going on in the news media and start to speculate.
Regardless of why rates are where they are or how long they will be, I want to give you things to consider as far as what low rates mean in different situations.
First, everyone benefits from low rates (except banks, but they end up selling the loans anyway). Less money that has to go towards interest is more money that can be distributed among the parties of a transaction.
That means for buyers, they’re going to be able to qualify for higher listed homes. They can submit higher offers than a high interest rate environment. Of course you might hear that “increases buying power” but consider the opposite side….
Sellers are now able to charge more and list higher. I’ve been in real estate for about 12 years now, and one thing that has been constant is that when people talk about a “good” market, they are almost always referring to high home prices for the sellers.
So if you think about it, when the central banks and government takes action to “stimulate the market” what they end up doing is making sure prices stay high. Even if the stated purpose is to help buyers.
Obama’s $8,000 first time home buyer credit didn’t help home buyers when everything was $8,000 overpriced, but that money effectively instead went to the seller.
But listing prices don’t move as fast or as often as interest rates do, so practically speaking it is good for buyers.
The other option to take when interest rates are this low is to look into refinancing. When rates drop I recommend all homeowners look at whether or not it makes sense to refinance.
(You can get a list of our recommended vendors and select “Mortgage”)
Whether you want to borrow some more cash or just adjust the terms of your loan, right now is a great time to see if a refi is right for you.
So while it can be confusing, its best to consider all angles and consider what you’re not being told. My recommendation is that when rates drop- that’s the time to sell. And in a seller’s market, downsizers benefit the most.
So let me know if you have any questions! This post was written March 12, 2020, and everything can change at any moment!