While this does not affect our views on products, we receive compensation from partners whose offers appear here. We are always on your side. See our full advertiser information here.
It’s been an incredible year mortgage rates, and hits are just coming. On December 3, Freddie Mac announced that the average interest rate on a 30-year fixed mortgage had fallen to 2.71%. This is the lowest level recorded in almost 50 years. The average 15-year fixed mortgage fell to 2.26%.
To give these numbers some context, a 30,000-year mortgage with a 30-year interest rate of 2.71% will allow you to repay the principal and interest of $ 406.23. Meanwhile, a 15-year mortgage for the same amount of 2.26% gives you a monthly principal and interest payment of $ 655.36. Borrowers often pass on a 15-year mortgage because they cannot swing the higher monthly payments that come with a shorter loan period. But because rates are so competitive, there may be more options now.
Should you hurry to get a mortgage?
Today’s mortgage rates are absolutely phenomenal. There is only one problem – house prices have risen sharply in the last few months. Low prices have caused a sharp increase in buyer demand, so if you buy a house now, you will save more on the mortgage than you will pay with a higher asking price.
The second problem with buying a home today is that you may not get the home where you want. Housing market inventory is so limited that you can only find a list or two in your target neighborhood, while a year ago you could choose from dozens of properties. Buying a home today can mean dealing with a property that is not ideal for your family or that does not fit your long-term plans. Or it could mean buying a house that requires a lot of work, which will only increase your costs.
How long will mortgages stay like this?
It is impossible to say exactly without a crystal ball. But given the state of the economy, it is fair to assume that rates will remain low until 2021 and quite possibly after it. Will prices continue to fall? Maybe or maybe not. At the current level, however, the exact numbers hardly matter.
For example, the difference between the 2.71% interest rate on a 30-year $ 100,000 loan and the 2.85% interest rate is $ 7.65 per month. Although rates will climb in 2021, they are unlikely to rise soon from an average of 2.71% to 3.71% or higher, and if you postpone your home search for a few months, you may find that inventory is opening up, making it easier to find affordable house that you like.
Delaying your mortgage application will also give you time to work on things like raising your credit score and lowering your debt to income ratio. This will make you a more suitable candidate mortgage lendersThis increases your chances of getting the best rates when you apply for a home loan.