Mortgage rates continue to linger at their lowest level in three years … and rates are predicted to remain attractively low as we enter the peak home-buying months of the year, according to Realtor.com Chief Economist Jonathan Smoke.
Here, a few facts from Smoke that anyone considering a home purchase this summer needs to know:
Lower rates mean more buying power
“As of Tuesday (May 10), the average 30-year conforming rate nationally was 3.6 percent, which is the lowest it has been in three years. The downward movement in rates this year has been a gift to the well-qualified potential buyer, as the lower interest rate provides for almost 6 percent more buying power.”
Lower rates mean tighter credit
“There are downsides to lower mortgage rates. One disadvantage is that credit availability declines marginally as the rates decline. With little margin, lenders become more risk averse, so indicators of credit tightness like the average FICO score have ticked up as rates have gone down”, says Smoke.
Rates are likely to stay under 4 percent in the near term
“The average 30-year rate will likely remain under 4 percent throughout the spring and summer and into the early fall. The average forecast sees the 30-year conforming rate ending the year at 4.21 percent, which would be 12 basis points higher than we ended 2015.”
Buyers should monitor rates closely and expect fluctuations
“In this type of environment, it will be crucial for would-be buyers or refinancers to stay on top of rates, work closely with mortgage brokers or lenders, and learn about options like locks and float-downs. Given how volatile rates have been this year, borrowers are likely to see both lower and higher rates from time of application to time of closing, which is what makes these options potentially attractive. However, they do come at a price, so you need to weigh the potential gains against the costs with your lender.”