Mortgage rates now look like the deal of a lifetime
August 23, 2010
| MoneyRates.com Senior Financial Analyst, CFA
Mortgage rates last week dipped to a new all-time low. In the midst of all the discouraging news about the economy, it's important not to lose sight of what an extraordinary opportunity these mortgage rates are for home buyers and homeowners.
According to Freddie Mac's weekly mortgage rate survey, 30-year mortgage rates checked in last week at 4.42 percent. Fifteen-year mortgage rates have been below 4 percent all month. A little historical perspective can highlight how unusual these rates really are.
Mortgage rates through time
Freddie Mac publishes mortgage rate history going back to April 1971. Since then, 30-year mortgage rates have ranged from the current low of 4.42 percent to a high of 18.45 percent in 1981. Prior to last year, 30-year mortgage rates had never dropped below 5 percent. Indeed, before the past decade, 30-year mortgage rates had never been below 6 percent.
With such a wide range of mortgage rates historically, what should be considered a "normal" mortgage rate? When you add up all the history, the average mortgage rate works out to 8.95 percent.
What the numbers mean
Mortgage rates as a percentage can seem like an abstraction, but running the numbers through a mortgage calculator yields a more concrete sense of what today's mortgage rates would mean in terms of a montly payment.
On a $200,000 30-year mortgage, the 8.95 percent average mortgage rate would require a $1,602.06 monthly payment. At current mortgage rates of 4.42 percent, that monthly payment would drop to $1,003.89.
There's no shortage of bad economic news out there, but you have to acknowledge that today's mortgage rates are truly the deal of a lifetime.
Richard Barrington
16 September 2010 at 4:08 am
James:
Under some circumstances, you can address insolvency with liquidity, but certainly in this country, the attempts to do so have been a classic example of pushing on a string. Interest rates are low, but it's academic because no one is borrowing and no one is lending. I do scratch my head at why policy makers are trying so hard to inspire more borrowing as a cure to a crisis that was caused by excessive debt in the first place.
James F. Buchanan
15 September 2010 at 6:40 pm
Bank of England Governor Mervyn King says he's ready to resume quantitative easing if the UK economic recovery falters due to the incoming austerity measures. Wholly inappropriate IMO - you can't address an insolvency problem with liquidity.