Whether you’re deciding to sell your home or looking to buy a home, you will gain an advantage from the currently low-interest rates on home loans. The unexpectedly low-interest rates improve home affordability for buyers and increase the pool of eligible buyers for homeowners looking to sell their homes. Last fall, the financial world predicted that the Federal Reserve would raise its federal funds interest rate and all home loan interest rates would rise as well. In December 2015, the Fed did raise its rate by 0.25%, and home loan rates bumped up a little. Then a funny thing happened – home loan rates began to fall. And fall. And fall again.
Today, interests rates of 3.625% for a 30-year fixed rate loan, and 2.875% for a 15-year fixed rate loan are extremely low. The explanation for why we continue to see near-historically low rates can be complicated. Suffice it to say that home mortgage rates are typically tied to the yield on longer-term treasury bonds, like the 10-year bond rate, and the yields on those bonds remain low due to continued economic struggles around the world. So even though our own economy shows signs of strength, our economic future is tied to the ups and downs of the global economy.
What does this mean for the Portland, Oregon real estate market? Affordability! For home buyers, the lower interest rates allow you to buy a home with a higher value. The monthly payment for a $350,000 loan with a 3.625% interest rate would be approximately $1596.00. The monthly payment would be exactly the same for a $315,000 loan with a 4.5% interest rate. Using today’s lower interest rates, the same buyer can afford a home priced more than 10% higher.
If you’re thinking about selling your home, the lower interest rates increase the pool of buyers qualified to purchase the home at your price. Buyers who might not qualify for a loan sufficient to purchase your home, can now look at higher priced homes because the interest rate on their loan keeps their monthly payment within their limits. In the example above, the buyer’s monthly payment would be $1596.18 on a $350,000 loan at 3.625%. The payment for the same loan at 4.5% would be $1773.40, or about $177 per month more.
Take advantage of today’s lower interest rates whether you are selling your home or looking to buy a home. I would be happy to answer any questions you have about how interests rates can impact your buying and selling decision, and to consult with you about your needs in today’s real estate market.
© 2016 Portland On The Move