12 Oct What Low Interest Rates Mean for Buyers
There has been a lot of talk as of late about historically low-interest rates, and for a good reason! The Coronavirus pandemic has brought about changes from the Federal Reserve concerning interest rates, including the largest single cut in rates since the 2008 financial crisis.
According to NerdWallet, as of September 17, 2020, the current average mortgage on a 30-year fixed-rate mortgage is 2.976%, and the average rate for the 15-year fixed-rate mortgage is 2.536%. To put this in perspective, according to Bankrate, the 30-year mortgage rate topped out at 8.69% in 2000 and 6.93% in 2006.
But what do low-interest rates mean for buyers?
To start, they give prospective home buyers a lot more power and flexibility in terms of what they can afford. This includes helping buyers purchase more expensive homes that they otherwise might not be able to afford.
However, lower interest rates can also mean increased competition for buyers. This is because so many interested buyers have been pounding the pavement searching for their dream home, realizing that they can save a significant amount of money with rates at their current levels. Would-be buyers are encouraged to find a home they love, and not merely purchase something only because interest rates are low.
But lower interest rates are not just a benefit to prospective home buyers; they also significantly impact current homeowners. With interest rates falling, many have taken advantage of the opportunity to refinance their current loans into ones with more favorable rates, sometimes saving them hundreds of dollars each month over the loan’s life.
Whether you’re an interested buyer or a current homeowner looking to refinance, it’s essential to realize that lenders have put in place a more stringent approval process because so many people have lost jobs or had a reduction in hours due to the pandemic. Patience will absolutely be necessary during the process, as many lenders have reduced the amount of staff in their offices or artificially inflated their loan rates to help control the overwhelming amount of interest.
If you are considering building a custom home in the Marion, Cedar Rapids, or Iowa City area, please consider Dahl Custom Homes for your needs. We are experts at custom home construction and would love to discuss your project in more detail.