By Scott Ellis, Bryant Bank VP Mortgage Loan Officer
NMLS # 971526
Mortgage rates have been putting on a fascinating show in the last year, and with a recent drop in interest rates, now is a really good time to consider purchasing a home or refinancing your current mortgage.
Over the last ten months, we have seen mortgage rates drop from approximately 5% to around 3.5% on a 30 year mortgage. For 15 year mortgages, the rate has gone from 4% down to 2.75%. These decreases are significant, especially having happened in a short amount of time.
Why have interest rates dropped?
The news has surprised some people since the predictions had been that rates would go up. So what changed? The 10-Year U.S. Treasury yield sets the tone for all interest rates in the U.S., and it has been falling precipitously. As of the end of August 2019, it had dropped 0.60% over the previous 30 days.
There are three factors leading to the yield going lower:
- There is fear that the global economy is slowing, and this is coupled with benign inflation expectations.
- The deterioration in U.S. and China trade relations. The world’s two largest economies are placing escalating tariffs on each other furthering the fear of future economic growth.
- As we look around the world at treasury yields, we see negative interest rates in Germany, France, Japan, and many others. This creates further demand for U.S. treasuries while driving bond prices higher and yields lower.
What does the interest rate drop mean for borrowers?
The decrease in interest rates means borrowing costs are lowering for people looking to purchase a home or refinance their existing mortgage. Let’s look at an example:
If you were going to borrow $200,000 last year at a 5% interest rate, your principal and interest payments would be approximately $1,073 per month. Compare that to borrowing $200,000 now at 3.5%. Your payment would be $898 per month, saving you nearly $200 each month. Again, this is significant savings.
For those who may have recently purchased a home at a higher interest rate, you may be able to refinance your mortgage and reduce your monthly mortgage payment. You may also be able to reduce the number of years left on your mortgage, but it’s important to speak to your banker about your options. Both are win/win scenarios for people in our community.
The time to buy or refinance is now!
My advice for anyone thinking about purchasing a home is that now is an excellent time. Making predictions about interest rates and how it will affect home values is almost impossible. Instead of waiting to see what may happen in the housing market, find the home you like and can afford, and buy it now. There are tremendous benefits to homeownership.
For anyone who feels like the time may be right for you and your family, contact a Bryant Bank mortgage officer. It’s our job to help guide you through the process. We are usually able to have our clients pre-qualified soon after our first meeting, and then we can have you on your way to making an offer on your new home. We can talk with you and answer all of your questions whether you are looking to refinance or purchase.
Our Bankers in Alabama Would Love to Work With You!
At Bryant Bank, family is at that heart of what matters most. And for us, Alabama is that family. Our vision is to see Alabamians experience a financially stable future and live in a thriving community. To accomplish this, Bryant Bankers put care into action each day to help others invest in their full potential. We are proud to offer Personal, Business, and Mortgage Banking services. Click here to locate your closest Bryant Bank to open an account with us today. Member FDIC. Equal Housing Lender. NMLS 582857.