Right now, an interest rate of around 4 percent is considered good, says Tim Milauskas, a loan officer with First Home Mortgage in Millersville, Maryland. Mortgage rates are more likely to rise in response to good economic or political news, and to fall in response to bad news. The Federal Reserve is relaxing the money supply (lowering interest rates) due to lower than desired inflation and concerns that economic growth is slowing. The days of rates below 3 percent are certainly behind us, but it's possible to find a good deal on a mortgage if you spend time walking around.
However, in the coming months, 4 percent interest is likely to be much more common in the mortgage market. And that is, in fact, a rate that compares quite favorably in historical terms. A mortgage discount point typically costs 1% of your loan amount and could reduce your interest rate by up to 0.25 percentage points. Global and national news causes bond prices to rise and fall, and mortgage rates move similarly in response.
Exactly how much lower your interest rate will be and how much higher your monthly payment will be depends largely on the specific loan term and the interest rate type you choose. Interest rates help determine your monthly mortgage payment, as well as the total amount of interest you'll pay during the life of the loan. These rates are different from Freddie Mac rates, which represent a weekly average based on a survey of quoted rates offered to borrowers with strong credit, a 20% down payment, and discounts for points paid. When finding current mortgage rates, the first step is to decide what type of mortgage best fits your goals and budget.
Some homebuyers take advantage of the low introductory rate of an ARM if they know they will move or refinance before the initial rate expires. As for what changes in mortgage interest rates will mean for the housing market, McLaughlin says home price growth could slow, but he doesn't expect it to decline. Bankrate's mortgage calculator can help you calculate your monthly mortgage payment, which can be useful when considering your budget. Unlike a fixed-rate mortgage, ARMs are affected by market fluctuations, so if rates go down, your mortgage payments Those discount points are an additional sum you can choose to pay at closing to lower your mortgage rate a little.
ARM rates are usually substantially lower than fixed rates, but keep in mind that you will only keep that rate low for a few years (usually 5, 7, or before it has the potential to increase). Your best mortgage rate will depend on your personal credit profile, down payment amount, income, and current debt burden. Many of the best mortgage refinance lenders can give you free rate quotes to help you decide if the money you would save in interest justifies the cost of a new loan. Although the trend could push more people into the buying market, McLaughlin says, as buyers see interest rates rise and think they should buy before rates rise further.