Interest Rates In Perspective
Mortgage interest rates continue to go up and for many buyers this worries them but I wanted to take a moment to put mortgage interest rates in perspective. Rates are important and yes an increase in a rate can make it more expensive to borrow money. However we are still seeing low rates despite the increases when compared to the last couple of decades.
Currently as of June 2018 a mortgage interest rates are hovering around the high 4.75% range and up. Remember rates change several times even in one day and the terms affect your rate. Someone putting more money down and financing for 10 years could have a lower rate than someone putting 3% down over 30 years. Terms matter but for the sake of keeping all things equal we will focus on minimum down payments and a 30 year mortgage.
If we look back just five to eight years we will see rates have been in a fantasy land. The rates hit all time lows in the three percent range which is behind ridiculous when you take a step back. With that kind of rate you are not far from borrowing money for free.
September 11, 2001 changed our nation and it had a negative affect on our economy. As a result rates were lowered to get our economy up and going again which lasted for twelve plus years. The second major issue was the recession in the 2008 time period and several years afterward which also kept the rates low. Since then the economy has gained strength and as a result you are starting to see those rates increase.
But let’s look at the early 2000’s, you were seeing rates in the six and seven percent range which was normal if not very good. After September 11 is when you first start this plunge in interest rates. The nineties were strong economic times for our country and our rates reflected that. It wasn’t uncommon to see seven percent and up be a standard rate.
How about the eighties? This decade had its fair share of financial hits which are reflected by the fluctuation of rates at that time. It is in the eighties that you saw double digit interest rates as high as eighteen percent! How would that fly in today’s market, trying to buy a home with that type of interest rate.
I like to look back at history and remind ourselves of how lucky we really are to have such low rates. Remember we didn’t even discuss the down payment requirements, those too are really low. In the past a minimum of 20% or more of a down payment was not out of the ordinary. So as you see the rates increase be sure to keep it all in perspective, it has been much worse and we are not even close to those times. We are still living in a mortgage interest rate fantasyland in my opinion.
With a heart of a teacher I look to educate my clients about the process of buying, selling or renting real estate. I strongly feel an informed and educated consumer will make better decisions and be less likely to be taken advantage of.
Have questions about this or other topics, don not hesitate to contact me.
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Luis Cuevas, Realtor®
RE/MAX Cross Country
1990 Justin Road
Highland Village, Texas 75077
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