Potential homebuyers who are made cautious by increasing mortgage interest rates in the past few months should act now! Because of the decision made by the Federal Reserve last Wednesday, rates for 30-year fixed mortgages dropped by about a quarter of a percentage point, becoming one of the biggest one-day drops in recent years.
Looking back at this year’s data, mortgage rates went from historic lows below 3.5 percent in May and gradually shot up to more than 4.5 percent last week. Those rates were with buyers paying nearly 1 percent of the loan amount in points and fees; zero-point loans had higher interest rates. Because of the fast increases in mortgage interest rates, this sudden plummet is a welcome change.
This jump was caused by fears that the Fed would taper its $85 billion-a-month program to buy government and mortgage bonds, which had driver home loan rates to record lows and given a big boost to the housing market. When it became clear that the Fed intended to continue its stimulus efforts, mortgage rates fell quickly.
From this point on, rates could continue to improve based on the Fed’s actions or rise again due to other economic factors. For now, rates are safely in the low to mid 4 percent range after today.
However, keep in mind that interest rates can often rise or fall because of a knee-jerk reaction and then whipsaw back.
If you were hesitant to become a home buyer, now is the perfect time to act fast while mortgage are low. Grab the opportunity and lock in that deal you deserve!
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