A mortgage rate is the rate of interest that a homeowner will pay over the duration of their loan, typically 15-30 years. Interest rates are influenced by many factors, including the fact that a lender expects a return on its mortgage lending investment, and that there are risks in making the mortgage loan. In 1971 Freddie Mac began to survey mortgage lenders in order to present a national average rate that Americans would pay for that year. Although a mortgage is simply a home loan there are many complicated factors that contribute to mortgage rates. Some of these factors include the applicant but others are tied into the economy. For this reason, it is a widely held view that the average mortgage rate is one good indicator of the national economy as a whole.
Perhaps more importantly, mortgage rates are a large factor for those looking to purchase a home or refinance an existing home loan. Fluctuations can sometimes seem small but even small changes can mean large savings for a homeowner. For example, if you were purchasing a $200,000 home, finding a rate at 4% instead of 5% could save $42,772.56 over the course of 30 years.
Today’s mortgage rates fluctuate between 4% – 4.3%, a historic low. In 1971 the national average was slightly less than 8%. This number fluctuated but slowly rose until the housing market crash in 1980 leaving potential home buyers with the prospect of almost 19% interest, a historic high. To put this in perspective: Buying a $50,000 home (the average cost of a home in 1980) at 18.63% interest meant paying approximately $280,000 in interest alone over a 30-year mortgage.
Mortgage rates have been steadily declining since the 1980s. For the past five years, the average interest rate has stayed between 3.6% – 4.5%. With mortgage rates so low there has never been a better time to become a homeowner or to refinance an existing home loan.
By US Federal Reserve (FRED) – https://fred.stlouisfed.org/graph/?id=MORTGAGE30US,#0, Public Domain, https://commons.wikimedia.org/w/index.php?curid=55212912
If you are wondering if refinancing is right for you, read our previous blog post “5 Reasons To Refinance Your Mortgage”. To learn more about Texas Republic’s mortgage rates call 972-334-0700 or come in and talk to one of our mortgage experts today.