Have you been keeping an eye on mortgage rates and interest rates? Did you know the Federal Reserve recently cut the federal interest rate by half a percentage point? With new options and a downward push on rates, here are four things for homebuyers to consider after rate cuts.
Better housing affordability.
Home prices and mortgage rates are two primary factors that affect mortgage payments. While the price of the home determines the principal amount borrowed, mortgage rates influence the interest paid on the principal.
Therefore, changes in either factor affect the monthly mortgage payments. According to reports from the National Association of REALTORS®, housing affordability is improved faster by lower mortgage rates than lower housing prices.
For instance, if mortgage rates drop by one percentage point, it can lower monthly mortgage payments by as much as 10% while lowering home prices too.
Simpler requirements for mortgages.
Another one of the key things for homebuyers to consider after rate cuts is the changes in mortgage requirements. It could be easier for potential homebuyers to meet lenders’ debt-to-income ratio requirements to qualify for mortgages that were out of reach before.
What’s more, lower rates can also help current homeowners with refinancing.
Lower mortgage rates.
One of the immediate results of the recent Fed rate cut is lower mortgage rates. Freddie Mac recently reported that the 30-year fixed-rate mortgage is currently at its lowest point in two years. More specifically, as of September 26, it averaged 6.08%, a decrease from last September when the 30-year FMR averaged 7.31%.
Increased demand for housing.
Depending on your local market, an increased demand for housing could affect availability. Luckily, in Lee County, Alabama, housing inventory has expanded with more homes listed in our area year-over-year. This includes existing properties as well as new construction.
Summary
After reading more about things for homebuyers to consider after rate cuts, contact Ryan Roberts to ask how lower rates could impact you individually. From there, he can expertly guide you through the entire homebuying process, start to finish. Learn more about our local market, and check out property showcases and community news by reading our blogs.