20 Years of Mortgage Interest Rates: Where are we headed? ‘Memory Lane’ discussed by Dave Boye, Independent Mortgage Broker in Montana.
I want to talk today about something everyone is afraid of, but we aren’t afraid of it – interest rates! Why are people afraid?
Well, over the last couple years, rates have been going up a bit. I’ve put together a graph of the last 20 years of interest rates. This represents what has been going on since 1998. Now, I’m going to talk about myself for a second:
I bought my house in 1998 at an 8% interest rate. In preparing this, I realized the national average at the time was 7%, but I wasn’t a mortgage broker at the time, so I could’ve done a little better. The peak a year later was 8%. Then I, like many others, refinanced in the area of 2002 because it went down to 6%, which was a 2% drop in interest rates, so it was irresistible. Personally I remodeled my house and refinanced again in the 6% range.
Then the financial crash happened and rates immediately dropped, and a lot people were ending up at 4%. At the best time, we were in the 3’s, but then had another spike in 2013 thinking it was coming back, and then once again some people saw the 3’s again during the lowest time. Then things have been creeping up. Over the last year, rates have gone from the 4’s and now we are starting to see borrowers getting loans in the 5’s. So the question is: what’s going to happen next?
3 possible things can happen: 1) They will keep going up to 6 2) Maybe something will happen to even things out 3) Something else crazy will happen and maybe we’ll get back down to 4. I haven’t heard many people talking about getting back to 3. So, any of those 3 things could happen in 2019. Right now we’re sitting around the 5’s.
What are we going to do about it?
The most important thing to think about is that we can’t control this. If you need a house, you only need to do one thing: take a look at the payment you can afford and what house you can buy with that payment, and that’s what you should buy. That will be driven by the rate and cost of homes. But there is a home out there that equals the payment you can afford, and it doesn’t matter what’s going on here.
BUY WHAT YOU CAN AFFORD! Then if you get sweet opportunities as things change, take advantage of those. Over time, you’re always going to do great if you just buy what you can afford.