Lower interest rates over the past few years have saved homeowners a lot of money, but how long will it last?
For the past several years, the Federal Reserve has aided the real estate community by maintaining the rate at which banks buy their money at nearly zero. To be clear, this is the starting wholesale point for lenders who borrow money from the Federal banks, and not the borrow rate for home buyers.
That being said, these low interest rates have helped maintain the real estate market through the worst of the most recent economic recession, and many claim that this strategy was one that staved off a major real estate collapse.
The Pros of Low Interest Rates
Of course, it sounds like we’re stating the obvious. Low interest rates are ALWAYS a good thing, right? It helps borrowers increase their purchasing power when buying a home, and allows homeowners the opportunity to refinance their mortgages at a lower rate. This saves both buyers and refinancers a ton of money over the long term. A win-win, right?
The Cons of Low Interest Rates
Of course, with all upsides, there may be some downsides. Fortunately for now, our economy, while back on an upward swing after the aptly named “Great Recession,” is not growing at a speedy rate. Many economists claim we’re just holding our own, with Gross Domestic Product (GDP) numbers moving upward at a rate that, in the very long term, may not be sustainable for healthy, robust national financial growth.
As our economy begins to really pick up steam, the Federal Reserve will have to make the determination to raise interest rates in an effort to curb inflation. While the Fed has hinted that they may raise rates soon, economists project that, if it happens, we won’t see any significant bumps upward until later this year.
Another factor of low interest rates that many people overlook is the fact that they affect the ability to save money in the safest manner possible. Savings and Certificate of Deposit accounts unfortunately have very low interest rates, which for some, make it hardly worth tucking money away with any chance of seeing any growth in interest. This practice has compelled many to consider shifting from a “saving” economy, to an “investing” economy, which may come with higher returns, but also comes with higher risk.
If you’re on the fence about buying a home…
Interest rates are still incredibly low. Rather than waiting to see what happens down the road, it may be time to consider your options and lock in your home loan rate now, rather than later. We are here to answer all of your questions about purchasing a home, and are ready to help you realize all of your real estate goals. Contact Montemayor & Associates for a no obligation home buyer consultation.Email Contact Form