For years, the idea that experts have been pushing for consumers looking to buy a home is that if you're already prepared to get into the market, there's no better time than the present. Over the past few years, mortgage rates have been hovering near some of the lowest levels ever observed in the sector, while home prices have ticked up slowly but surely toward pre-recession norms. In short, affordability was sky-high, even if some skewed perceptions made that a little more difficult to see.
In fact, people became so accustomed to mortgage rates hovering in the mid-3 percent range that when they started to move a little higher than that, buyers and refinancers (the latter in particular) shied away from the market. From a rational point of view this probably wasn't a great idea, because affordability was so high in comparison with historical averages. However, people were generally holding out because they felt as though there was a better deal on the horizon. And now, it's starting to look like they might have been right all along, despite warnings to the contrary.
This is what affordability looks like
For more than a year and a half at this point, mortgage industry experts have been cautioning consumers that rates would be on the rise soon, and that anyone waiting to get into the market was risking a future in which buying a home would cost potentially tens of thousands of dollars more over the life of a loan. That was a judicious warning, as far as playing the odds is concerned. The likelihood that rates would rise significantly outstripped those related to rates staying the same or dropping.
But now, unforeseeable economic strife overseas has come around, and potentially not only kept rates in the same area as they have been more or less since 2013, but could even force them to drop past historic lows, potentially into the 2 percent rage. The previous all-time low was in the mid-3 percent area.
When does normalcy return?
Indeed, projections early last year that mortgage rates could have approached the 5 percent range before 2016 even began have been obliterated. Likewise, those for rates to reach 4.5 percent by the end of this year are now looking quite unlikely to come to pass. And that, of course, provides a good opportunity for both would-be buyers and current homeowners who still haven't refinanced. That may even be true of those who did refinance when rates were as high as 3.5 percent. The general rule is that if you've had your mortgage for a few years, and can cut your rate by at least half a percentage point, then a refinance is likely a good idea.
This is an issue consumers should monitor closely in the coming months, because mortgage rates of less than 4 percent are likely to persist for some time to come, and will be extremely affordable in comparison with any kinds of deals consumers could have gotten before the economic downturn.
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