Are Mortgage Interest Rates Lovelier the 2nd Time Around?
Recently, The Weeknd just sold his 3-acre Hidden Hills estate to Madonna for $19.3 million. Chart-topping singers do tend to pass mansions back and forth, although their songs seldom mention the subject at all. You have to really stretch a lyric’s meaning to the limit to read in anything having to do with real estate. That’s been true going all the way back to when Frank Sinatra was entertainment’s Chairman of the Board.
Still, come to think of it, he once assured fans that “Love is Lovelier The Second Time Around.” Now that’s a sentiment that’s absolutely relevant for one group of local home buyers—namely, those who failed to take advantage of the very lovely mortgage interest rates that had long been available. Recently, that love affair had begun to cool as mortgage interest rates began to climb.
For everyone with a firm grasp on historical mortgage interest rates, any loan rate beginning with a “3” is loveworthy—especially when you recall that the average over the past 50 years is 7.9% (and that’s including the past two bargain-basement years). For would-be home buyers, the future had begun to look less lovely. Starting at the beginning of March, average rates had registered a disturbingly steady drift in the wrong direction. To most observers, it looked as if the tables had turned.
But rates staged an abrupt about-face, almost revisiting the record-setting 2%s (Freddie Mac calculated a U.S. average of 3.04%). The Washington Post recalled the previous seven-week upward moves before declaring, “then they started pulling back last week.” This second-time-around visitation to cellar-level rates will no doubt create a fresh crop of opportunities for buyers and sellers.
The arithmetic is convincing. For a $500,000 home loan, the cash difference between last week’s average and Freddie’s figure yields a monthly reduction of $1,515—a cash difference of more than half a million dollars over the 30-year life of the mortgage. The same calculation for Madonna’s $19.3 million acquisition would yield savings that are (as The Weekend might sing) “blinding.” Once today’s buyer finds the right home, ’s mortgage interest rates will go far toward making a purchase affordable.