On a weekly basis, I am currently receiving solicitations from lenders offering me a 2.5-3.5% interest rate if I refinance my house. Actually my wife keeps getting that mail and I just get the College tuition bills for my 3 daughters but that’s another story. Anyway these ridiculously low rates made me think of what a unique time it is in the mortgage and home buying industry.
When I entered real estate in 1986 the interest rates were 11.5%. AND THOSE WERE CONSIDERED GOOD RATES! Just a few years before the market was stymied with 16-18% interest rates. Think about that for a second. Borrowing $50,000 today at 2.5% for 30 years costs a buyer about $200 a month. In 1982 at a rate of 18% the same $50,000 mortgage would cost a buyer $750 a month for 30 years. That is a crazy difference.
Home prices are lower today than they were 10 years ago. But that is not the best reason to buy a home now. The best reason is because interest rates are at a once- in-a-lifetime low right now and they will not stay this low for long. Many younger buyers in our market today have never known interest rates over 5% but believe me that is not the norm. These are strange times we are experiencing and the low rates will not last forever. Now is the time to take advantage and save tens of thousands of dollars over the life of your loan.