Mortgage rates tend to fluctuate based on a variety of social and economic factors. In late February, the average new mortgage was carrying an interest rate of 3.85 percent, which is historically a very low and favorable rate.
Although the Federal Reserve has said that they intend to raise the prime interest rate in the near future, their most recent meeting makes it clear that March won’t be the month for those increases. Right now remains a great time to take advantage of these low rates by locking in your home financing.
Lower Rates Now, Higher Rates Coming Soon
Since the election of Donald Trump, interest rates on mortgages have increased. These higher rates have made some people shy away from mortgages, deferring financing for a few more weeks or months. Right now, however, may be the ideal time to obtain financing. The current administration has made no secret of its intentions to invest in infrastructure and change current tax regulations. Those changes will impact inflation, which, in turn, will result in a change in interest rates.
Inflation is one of the primary considerations of the Federal Reserve when it decides what to do with the prime rate. Increasing the prime rate can offset inflation, but it also tends to slow borrowing until borrowers adjust their perceptions to include the changes in rate. Conversely, when risk of inflation and overall borrowing is low, the Federal Reserve may lower the prime rate to encourage economic growth. Given how low rates have been since the housing collapse of 2008, there’s little reason to expect that rates will drop any lower. Rates will likely only increase as a means of slowing inflation.
Now Is a Great Time to Secure a Mortgage
Because rates have remained low for so long, this is a great time to secure financing for a home purchase. You can take advantage of low rates and the improved overall economy. The near future likely includes the increase of the prime rate, which will then impact the interest rate on all consumer products, particularly mortgages which have a closer and more direct relationship with the prime rate when compared to other forms of credit, such as revolving lines and credit cards.
Even half of a percentage point more in interest can cost you hundreds or thousands more when it comes to the lifetime of your mortgage. Locking in a low rate while the prime rate remains low is in your current and future financial best interests. Talk to the experts at Seattle Mortgage Planners as soon as possible to see if obtaining a mortgage now is a wise financial decision.