Monday, February 7, 2011

Home Loan Rates – A Perspective

Average mortgage rates during 2006, 2007 and 2008, were respectively 6.41%, 6.35% and 6.04% with average points being around 0.5 for all years. Currently rates have begun to creep back up from historical lows of around 4.0% to currently around 5.0%.

For Sale logo So even though rates are higher than what they were just recently, they are still fairly low and have now approached the level last seen in 2009  when they averaged 5.05%. Keep in mind, rates fluctuate daily and are sensitive to external pressures and events. 


To put this into perspective, back in 2006 when rates averaged 6.41%, the interest cost of a monthly mortgage payment per thousand dollars borrowed was $6.26 and the cost during 2009 when rates averaged 5.05% was $5.40. The cost of a house varies depending on location in the United States, but assuming a mortgage of $200,000 on a 30 year fixed rate mortgage, the monthly payment per month based on these two rates differs by $172.00.

According to the Mortgage Bankers Association in their January 2011  Mortgage Finance Forecast, rates will continue to slowly rise through 2011 and 2012, to a forecast of 6.1 % in the 4th quarter of 2012. As we have demonstrated here, as rates rise, so does the cost of the monthly payment.

If this trend holds true, it may be a good idea to begin planning your housing purchase. It is always better to plan your purchase based on your individual needs rather than to do so in an effort to time the market for a lower rate. As always, consult with a professional financial advisor before making any decisions.

Charles Kraus, Associate Broker
Coldwell Banker Residential Brokerage
Annapolis, MD  Office: (410) 919-2642
email:  web: Charles Kraus Online

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