Mortgage News: Purchasing Power Increases as Interest Rates Hit 16 Month Lows

If you are in the market for a new home, now is the time to act as interest rates fall below 4 percent.

Due to concerns about the global economy, the yield for Treasury bonds has fallen, leading to a drop in interest rates lenders charge borrowers for mortgages. According to Bloomberg, the interest rate for a 30 year fixed mortgage has dropped to below 4 percent for the first time in the past 16 months. As a result, the number of applications for mortgage refinancing increased last week by 10.6 percent along with a spike in demand for home purchase loans. NJ.com reports interest rates for 30 year fixed mortgages range from 3.62 percent to just over 4 percent.

The Relationship between Interest Rates and Purchasing Power

In addition to reducing your borrowing costs, a drop in interest rates may make it easier for you to buy your dream home because your purchasing power increases as rates drop. According to the website MortgageReports, with every one percent shift in interest rates, your home purchasing power increases by 10.75 percent. Given the current interest rate environment is likely to be short lived, time is of the essence to lock into an interest rate for your mortgage.

To learn more about how you can take advantage of today’s low interest rates, contact a local mortgage broker today!