Housing market interest rate trends

The rise and fall of the interest rate

We’ve come a long way since the stagflation of the 1970s and the recession of the early 1980s. It’s a new era for the housing market. Inflation won’t go away, but with a much healthier economy, mortgage rates have been at an all-time low over the past few years.

Based on Bankrate.com’s analysis, numbers are steady and continue to reshape the market since the devastating crash of the late 2000s—rates have remained below 6%. What does this mean for homebuyers today… and for the future?

Take advantage of low rates

A lower interest rate could mean a lower APR, which could save you thousands in interest over the full term of your mortgage. Here are some tips for getting the most out of a low rate:

  1. Buy property now
    There’s no better time to purchase a home than when the economy is flourishing and
    rates are hovering around 4.5%. And that’s on the high end for estimations.
  2. Pay more each month
    Since total interest correlates depends on the time it takes you to pay off your loan,
    making higher payments each month could save you from paying a significant amount of
    interest. (NOT-SO) FUN FACT: In the early 1980s, 82% of a homeowner’s total payments on a 30-year loan would go toward interest.
  3. Choose the right type of rate
    When you lock in a low fixed rate vs. opting for an adjustable one, you can count on
    monthly payments that won’t change—for the life of your loan.
  4. Consider refinancing
    If you purchased your home at a higher rate, refinancing to a lower one could save you.

It’s true that buyers and sellers are experiencing advantages right now, but rates can’t stay this low forever—can they?

Interest rate predictions for the next year

These kinds of predictions are difficult to make and have been wrong in the past, but experts in the industry do predict a rise in interest rates, home prices and overall affordability. Even the low inventory has caused a dilemma, with home values increasing. This is great for sellers, but not so much for buyers.

So why are there less homes on the market? Baby boomers aren’t selling. Instead, they’re planning on retiring in the homes they’ve had for years—playing it safe since many are still recovering from lost investments in 2008. Many people who invested in properties after the crash—much of whom are baby boomers—own a large percentage of them, and they’re finding it more profitable to rent them out than to sell.

In any financial environment, it’s probably wise to expect dips and peaks, and that the economy thrives on a healthy housing market, which is driven by low interest rates. With talk of rising rates, what could this mean for the economy?

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