Mortgage rates have dropped below 4 percent for the first time since November, and home buyers likely will want to take advantage of the lower borrowing costs. The average 30-year fixed-rate mortgage fell to 3.97 percent for the week ending April 20, according to Freddie Mac’s weekly mortgage market survey. “We are in the spring, and people are out looking to buy homes,” says Len Kiefer, deputy chief economist at Freddie Mac. “These low rates are really going to help out with affordability.”
A drop in mortgage rates reduces monthly mortgage payments, which also can help buyers purchase pricier homes that they may not have been able to afford prior. But about a one-third percentage point drop in mortgage rates could be relatively modest in many areas of the country. For example, the monthly mortgage payment for a home at the median price of $236,400 (with a 20 percent down payment) would be about $40 less today than a month ago, The Wall Street Journalreports.
However, in higher-cost markets such as California, the lower mortgage rates could make a bigger difference. The drop in the monthly mortgage payment would be equivalent to about $90 in monthly savings for a home buyer purchasing a home for $600,000. Further, the size of the mortgage that a buyer could qualify for could increase by about $25,000, according to Black Knight Financial Services.
Source: “Cheaper Mortgages Could Spur Housing Market,” The Wall Street Journal (April 23, 2017)