Summer is traditionally a busy time, but record-low mortgage rates are expected to make this year even more so. Home loan rates have been falling for the past six weeks. A 30-year fixed loan rate is 3.67 percent. A 15-year fixed rate is 2.94 percent.
The last time home loan rates were this low was around 1958. That should be a big incentive to buy or to refinance. It's also turning into an incentive for some people to switch careers. The Santa Clara County Association of Realtors is seeing a steady increase in its ranks for the first time in five years and interest rates may be playing a role.
For a newly-listed four-bedroom, two bath house in Campbell for sale at $799,000, a 30-year fixed rate loan with 20 percent down at last week's rate would mean a monthly payment of $2,960. At this week's lower rate, it would be $2,931 or a savings of over $10,000 over 30 years.
Six weeks of falling rates may help the prime summer home buying and selling season, but will low rates last? "I do think that we need to keep an eye on what's happening after the election in November and what's happening in the European Union because we're a global economy and everything that happens around the world affects us locally," says President of the Santa Clara County Association of Realtors Barbara Lymberis.
Doug Jones, founder of San Jose's Mortgage Magic, says low mortgage rates stimulate spending. "Every time we move money, it helps the economy. Every time a customer buys a car, it helps the economy. Every time a person lowers their payments and then they have more cash to put into purchasing, that helps the economy," he says.
One of Jones' clients came up with an interesting way to put lower interest rate savings in perspective. He saved over $290,000 by switching from a 30-year loan to a 15-year loan at a lower rate, enough, he calculated, to pay for his two daughters' weddings, their college tuition, vacations for 15 years, a diamond ring for his wife, and a luxury car, with over $58,000 left over.
"Interest rates under four percent and having stayed here for a long, long time should be an indication to people that they really need to take advantage of it now," Lymberis says.
Anyone refinancing or taking out a new home loan may have to be patient because lenders are sometimes taking over the usual 30 days to close because of all the loan modifications they're doing for distressed homeowners.