This spring brought good news to home buyers. Home loan rates fell to their lowest since 2016. 30-year, 15-year, and 5-year fixed rate mortgages all saw significant point decreases, giving hope to those looking for more affordable mortgages.
If you’ve been looking to buy a home, you already know that a mortgage is most likely going to be one of your biggest monthly expense if not the biggest. That means fluctuations in mortgage rates can make the difference between being able to afford the home you really want or having to readjust your plan. These lower rates can move you closer to being able to buy your dream home.
What Brought Such a Big Drop in Home Loan Rates?
There is a complex recipe composed of several factors such as geopolitical stability (which has lately frayed the nerves of many investors who closely watch global goings-on between the US and countries it may have strained relationships with) and bond yields (which surprisingly do better when the country’s economic growth isn’t doing well).
But those aren’t the only factors that help determine home loan rates. The housing market goes through periodic fluctuations and how investors feel about the housing market can be reflected in the mortgage rates. Recently, the uncertainty over the future of the Fannie Mae and Freddie Mac programs has had some investors feeling less enthusiastic about mortgage bonds.
Now, you may have heard a bit about Fannie Mae and Freddie Mac when the mortgage crisis hit its peak a few years ago, but you may not know the part it plays in the national mortgage scene. Even though neither institution deals with direct loans (they work with lenders), research done by the Urban institute shows that nearly half (45%) of all new mortgages in the country have been through the Fannie Mae and Freddie Mac programs in recent years.
Once disaster struck, the federal government took control of the program and did some reorganization over the past few years, including the appointment of more business-savvy leadership. Mark Calabria, the new regulator of the programs, is working to maintain the stability of the housing market, particularly through supporting many of the new changes that have been implemented since the crisis.
Though this, along with the lower mortgage rates, are positives for home buyers, there are still many unknown and changeable factors. Those in the housing market can’t realistically expect the currently low home loan rates to fall much further than they already have, making this a good time to buy and obtain a mortgage at a favorable rate.