The COVID-19 pandemic has affected everything in our daily lives…
From our schedules, how we travel, even to the amount of toilet paper and hand sanitizers available in the local grocery store shelves. However, as a homeowner, there is one other thing that you might want to keep an eye on: Falling mortgage rates.
In the United States, the Federal Reserve cut rates by half a percentage point on March 3 (to keep up with the market), then again by 1.5 percent on March 15 (in response to COVID-19).
As a home buyer
Lower mortgage rates can save you a ton of money off your overall mortgage which affect your mortgage payments. This makes purchasing a home even more less expensive than, say, paying for rent. Imagine what you could do with the extra money you save each month!
While no one knows the long-term effects COVID-19 will have on the economy, many anticipate another rate drop to follow. Potential buyers might take a “wait and see” approach, which leads to homes languishing on the market, price cuts and possible trends in lower home values as a result if it’s a long-term issue.
As a seller
Low mortgage rates motivate many potential homebuyers to take the leap into homeownership. When there are more buyers than there are homes, supply and demand apply and you can expect property values to increase.
Interest rate changes don’t just affect mortgages, it also affects savings accounts, CDs and other investments. Lower rates of return elsewhere mean less capital that could go into purchasing real estate, a factor that puts “supply” ahead of “demand.” Ideally, though, lackluster rates of return could motivate potential buyers to put their money into real estate instead, leading to a rise in home prices (and home values).
As a home owner
If you’ve been thinking about refinancing, now’s a good time to lock in a low rate. We’ve seen people shave off 10 years of the mortgage without costing them extra or adding more to their mortgage payment. But if you’re concerned about the value of your home (particularly if you’ve been looking to sell in the next year), the news is a little more complicated.