July 2020 Marked The Lowest Mortgage Interest Rates On Record
The average rate for a 30 year fixed conventional loan dropped to 3.1% and some lenders have been able to provide even lower rates, depending on one's personal financial picture. Here are a few graphs illustrating the significance of recent lower rates and money saved over the life of the loan. These low rates, along with pent up buyer demand due to the Covid-19 virus and the shelter in place order, have added to our already active market. In many areas and price ranges, we are seeing home sales at a quicker pace and for a higher price. Sellers and buyers both benefit with lower rates because the overall cost of the loan is less and a buyer can qualify for a larger loan amount, motivating buyers to take advantage of this opportunity to make a move.
The first chart shows a $500,000 loan amount. The 3% interest rate fixed over 30 years amortized would equate to a total interest paid of $259,887 over the life of the loan, and a monthly payment for principal and interest of $2,108. At a 5% interest over the same period of time, the total interest would equal $466,788, and the monthly payment would be $2,684, or $576 higher per month. The 2% difference represents a savings of $207,891 over the life of the loan. Interest rates were averaging 4.72% in August of 2018, and they have since been hovering around the 4.5 to 4% mark until dropping back below 4% this year.
The second chart depicts the same scenario for a $1 Million loan amount. The total loan difference of 2% at that amount equals a savings of $414,783. Rates vary on a day to day basis and what is quoted can depend on a number of factors including a buyer's credit worthiness plus the type of residential loan as there are many options.
30 YEAR MORTGAGE TREND HISTORY Source: Macrotrends