Mortgage rates have dropped to 4.58 percent for an average 30-year fixed loan. This is the lowest rate on record according to mortgage company Freddie Mac since 1971. This actually matches mortgage rates in the 1950s when long-term rates averaged 20 to 25 years. With this incredibly low rate rate, lending has increased, but still lags behind mid 2009 levels. This begs the question of “why?”
For starters, there is a focus on stricter (and appropriate) lending regulations. Much of the housing collapse was the result of relaxed rules in this arena. Additionally, homes may be worth less than what the homeowner currently owes on their mortgage. For many in a truly solid financial standing, they may have already refinanced in the past 18 months when rates were low albeit not the lowest in 30 years. For individuals in poor financial standing, there is a laundry list – limited equity, poor credit or uncertain income – all of these factors would make it difficult to take advantage of the new rates. The refinance also costs real dollars in fees, so the investment needs to be worth the investment. The costs of refinancing are generally considered worthwhile for homeowners who can shave at least three-quarters of a percentage point off their rate and plan to stay in their homes for several years. The final kicker – the expiration of the tax credit, which helped inspire new homebuyers, expired April 30.
For an individual or family relocating to a new city, the mortgage rate represents a terrific opportunity, especially if this is meant to be a long-term relocation.