People buying homes today are paying $200 a month less for the same home than those with bad timing who purchased at peak rates
Scott Olson/Getty Images
- The current average interest rate for a 30-year mortgage is 6.13%, according to Freddie Mac data.
- This means rates are down roughly a full percentage point from the November peak of 7.08%.
- One homebuyer told Insider he's excited to get back in the market because of falling rates.
How much can one really save on a mortgage that's just 1 percentage point lower? It turns out that it's enough to bring shoppers off the sidelines and back into the market.
Rapid home-price growth and soaring mortgage rates led to a dramatic downturn in housing demand throughout the fall and winter months of 2022. But as softer economic data encourages the Federal Reserve to slow the pace of its rate hikes — which were largely responsible for last year's surge in borrowing costs — mortgage rates are trending lower and enticing more buyers to return to the US housing market.
A buyer who purchased a home at the national median price of $393,682 in November with a peak mortgage rate of 7.08% would be paying $2,112 each month on a 30-year fixed-rate mortgage (after putting 20% cash down at closing). But if a buyer purchased a home at the same price with today's average mortgage of 6.13%, they'd be looking at a payment of $1,914. That's a difference of nearly $200 a month.
Given today's steep cost of living, that extra cash could go a long way for the typical family. The savings potential — combined with a market where sellers are feeling more demoralized — is a major reason many Americans feel that now is a great time to purchase a home.
Jason Wilson, a 32-year-old home shopper, is looking to take advantage of lower interest rates to finally close on that dream home.
Wilson and his wife live in a high-rise condo in Chicago's Lincoln Park neighborhood. He said they wanted to move into "something closer to the ground" like a townhouse or a single-family home where they could raise children someday.
"We're really trying to purchase a home so we can take the next step in life," Wilson said. "We want to be in this home for the next five, seven, or maybe even 10 years, and obviously interest rates will change over that time. It's something we're watching very closely."
Wilson added that they were looking for homes in the $700,000-to-$800,000 range, which could carry an average mortgage payment of $4,800 to $5,600, according to Bankrate.com's mortgage calculator. If they had bought a similar home just a few months ago when mortgage rates were closer to 7%, their mortgage payments would have been roughly $6,000 a month.
Wilson told Insider the couple planned to save the additional funds for expenses such as childcare or doctor's visits once they had children. They might also do some renovation projects like adding a back patio, depending on the home they buy.
"It's really great timing for us," Wilson said. "We're ready for a bigger home and interest rates are starting to fall. Listings are starting to tick back up, too. It's really exciting."
Correction: January 30, 2023 — An earlier version of this story misstated the monthly amounts buyers would owe on a 30-year fixed-rate mortgage for a $393,682 house after a 20% down payment. They would owe $2,112 a month with a 7.08% mortgage rate or $1,914 a month with a 6.13% rate, not the other way around.
from Business Insider https://ift.tt/oHslSuD
via IFTTT
Comments
Post a Comment