Potential buyers can breathe a bit easier as mortgage rates decrease this month. After soaring rates and high inflation, many potential homebuyers have found themselves unable to afford a home. Today let’s look at the mortgage rate decrease and its effects on your ability to purchase a home.
How Much Did Rates Decrease?
Business Insider says, “Inflation and Fed hikes pushed mortgage rates up to a 20-year high in 2023 and 2024.” In August, rates have fallen to a seven-month low. Currently, the interest rate for a 30-year fixed-rate mortgage is 6.375%. For a 15-year fixed-rate mortgage, the interest rate is 5.625%. Business Insider also projects that interest rates will continue to decrease over this year.
Why Did Rates Fall?
Economic factors work together to affect mortgage interest rates. For example, inflation, Federal Reserve decisions, and the relationship between bonds and mortgage rates all impact the country’s rates. Our nation’s staggering inflation has cooled and has begun to decrease. According to Business Insider, the slowing labor market has the Federal Reserve cutting rates. Therefore, it only makes economic sense that rates have begun to decrease.
What Can You Control?
Although you cannot control inflation or the Federal Reserve, you can control the personal factors that affect the mortgage rate that a lender offers you. What are the personal factors? Your credit score impacts the rate a lender will offer you. The higher a credit score the better for your pocketbook. Therefore, pay down debt and pay your bills on time. Also, the loan amount you request can affect the overall interest rate. So, the more you can put down, the less you will have to borrow, which should make your interest rate lower.
Another aspect of the loan process that you can control is asking for a 15-year mortgage. Your monthly payment will be higher, but the amount that you pay for your home will be substantially lower. Ramsey Solutions only recommends borrowing with a 15-year fixed-rate mortgage. To read more, click here. Also, notice that the August rates are quite lower for a 15-year term compared to a 30-year one. It can make a difference.
Since a mortgage rate decrease has occurred and is projected to continue to decline, potential homebuyers are encouraged that they might be able to realize their dream of homeownership. Work on the factors you can control and take advantage of these lower rates. If rates plummet, you can always refinance in the future.