Interest Rates Drop, Leading to the Highest Mortgage Demand Since 2016
One of the big factors that comes into play when deciding to purchase or sell a property is interest rate. Often times, current home owners do not want to sell because market rates are higher than their current interest rate. On the buying side, new buyers are generally looking for the lowest rate possible, since they will be locked into this rate for 15-30 years (on average). In the past few weeks, the Federal Reserve has lowered interest rates, and has in turn caused the highest demand in new mortgages since 2016.
So the question is: What does this mean for buyers and sellers looking to make a sale or purchase in 2019?
If you are thinking of selling, now is an amazing, strategic time to make the move. With rates so low, sellers who are happy with their current interest rate are still able to lock in historically low on their next purchase. Given current conditions, many homeowners could enjoy a *literal* lateral move. In the past we were encountering sellers who took an increase in rate once they purchased their new home. As rates decline, it also means that sellers are typically able to net more on their home sale–because homebuyer purchasing power increases. With more purchasing power, the market opens up and stimulates more demand. And more demand means an increased opportunity for sellers to make top dollar.
Interest rate declines are not only great for sellers. Many buyers who were not planning on purchasing this year, are now stepping into the ring/moving their timelines up because of how much money it will save them in the long run. When we talk about buyer purchasing power, we are referring to how much of a house payment buyers can afford based on their financial health as well as their interest rate. As interest rates decline, buyers can often afford to purchase at higher price points. The house a buyer can afford this year will typically be out of their price range next year, solely because interest rates have increased. A 1-point difference in interest rate can cost the average homeowner roughly $68,000** over the life of the loan. Although interest rates should stay consistent for the rest of 2019, they are scheduled to raise in 2020. Reach out to one of our Buyers Specialists or Listing Specialists to ask more questions and see how this interest rate decline benefits you individually.
** Based on a loan amount of $300,000. Monthly payments will vary from person to person and can be confirmed with a mortgage professional. This sum was calculated with rough estimations, but is a good indication of what a 1% difference does make.