Holy Interest Rates Batman…Look at them Drop

Westcoe Realtors, Riverside California…Seems like the financial world these days is like Midwestern weather…if you don’t like it, just wait a few hours…it will change.  The bottom line here is that the interest rates on 30 year fixed rate mortgage loans have dropped the last few days faster than a souffle with a slammed oven door.

As of today, a qualified borrower can get a 30 year fixed rate loan at 4.75% interest.  To put that in prospective, the monthly payment for every $1,000 borrowed is only $5.22…which means that the principal and interest payment for a $100,000 loan is $522 per month…for $200,000 the payment would be $1,044.  The term “cheaper than rent” certainly applies with rates this low.

So what happened?  Why did rates drop to these historic low levels?

You can probably get a more detailed answer on some really deep financial blog, but the cocktail conversation answer is that the trouble in Greece and other Euro using countries has caused huge investors to purchase 10 year United States Treasuries as these investors look for safety over return.  As a result, our 10 year treasuries have dropped the interest rates they need to pay to attract these huge investors…and as the 10 year treasury rates drop, so go house loans.  Short and sweet.

Where all this goes from here is anyones guess…and trust me, it will be a guess.  We at Westcoe generally stay away from predictions because like everyone else, they are generally wrong and no one remembers them anyway.  However, what we can say is that if you are even remotely thinking of buying a house, you want to jump on this bandwagon of low interest rates and ride it until it drops…because rates like this are the residue of opportunity, not design…and they will rise at some point.

No one could have predicted these rates, so it stands to reason that no one has a clue how long they will last…but when you really can purchase a home for less than you can rent it, that’s not exactly a bad time to jump in.  Saving thousands and thousands of dollars on a home payment is a good thing.

So…good luck, and good house hunting.  It will be worth it.