As most people know, the Interest Rate on your loan is the biggest factor when calculating your monthly mortgage payment. However, many people believe there to be a correlation between the Fed funds rate and mortgage rates, but that is not always the case. These interest rates can mirror each other at times, however a mortgage interest rate is driven by inflation more than any other factor. Inflation has been in check for the past decade, helping us keep these low mortgage rates, while Fed funds rates have fluctuated.
As of September 2019, we are experiencing historically low rates, consistently staying under 4% throughout the summer – and there’s no clear sign of significant increases in the near future. While people are still actively searching for and purchasing homes, there hasn’t been a huge spike in home purchases, mostly due to these three factors:
- Supply & Demand– developers are building as fast as they can, however not all markets can keep up with the demand which limits inventory available to home buyers.
- Housing Affordability – Due to the factor listed above (supply) most homes have multiple offers on them, which pushes the purchase price higher and higher.
- Down payments – Historically high student loan debt, wages vs. the cost of living, and rental costs prevent individuals from being able to save up enough money for a significant down payment.
However, these factors should not be deterrents. Thanks to the low interest rates, buyers can put as little as 3%-5% down on a home and still have an affordable monthly payment. Developers are looking at more dense footprints, and smaller floor plans to help meet the demand for affordable housing. And, with rental properties being just as difficult to secure as a home to purchase, why not spend your time looking for a long-term investment by purchasing a home?
There’s never been a better time to try and purchase a home- and if you’re still not convinced, contact one of our loan advisors today to learn more about the buying process. Your future is in reach, and CB&T Mortgage is happy to help you get there.