Happy Holidays! As we are quickly approaching the New Year, I wanted to talk about the interest rate decrease that we are seeing. It’s significant! Even though rates are down, many people are wondering what it means? So, I thought it would help to put real numbers to it.
Many people will see a savings of over 9% in their house payment right now compared to where interest rates were at 6 – 8 weeks ago. This is a big improvement!
Conservative Calculations
According to Freddie Mac’s website, rates maxed out at 7.79%. But I’m calling BS on that… there is no question that we were in the low-8% rates a few months ago. At that point, it was very rare for anyone to get an interest rate that started with a “7”.
I wanted to look at Freddie Mac’s information because it is a conservative way to look at the numbers. They show that the interest rates have dropped down to 6.67% as of last week. I used a $750,000 purchase with 10% down. We could even calculate this at 5% or even 3% down if you are a first-time home buyer (there are many options available).
That is a savings of just over $530 per month in the payment compared to what it would have been at the peak interest rates. It’s a 9.2% savings!
Questions People are Asking
The obvious thing to ask: what if interest rates keep going down? We all want to start making assumptions about the future. I hope that rates will keep dropping, and in the near-term I think it’s a possibility.
But there are two main points that need to be considered:
- There is no guarantee that rates are going down. They could go back up – we’ve already seen that happen. In late summer and early fall, I was lulled into a false security, thinking that we had maxed out at the 7.5% range. And then rates jumped into the 8% range. I didn’t expect that! Time will tell what happens.
- Market demand is going to increase: If rates continue coming down, it will definitely pull more people into the real estate market. This trend will cause real estate prices to go up. For simplicity, if prices go up by 10%… then the payment will be a little higher compared to what you could get right now with the current interest rates.
Houses are On Sale Right Now
We will see what happens! But to summarize the current situation, we can say that houses are on sale right now by about 9% because of the decrease in interest rates. It’s a huge savings, which means it’s a great time to buy if you are waiting to jump in the market.
Contact me for more information. We can look at the numbers and find something that will work for you.