Thursday, June 25, 2009

Don't Hold Your Breath: Mortgage Rates Below 5% Are Gone for Good

Posted Jun 25, 2009 07:00am EDT by Peter Gorenstein in Investing, Recession, Housing

Waiting for mortgage rates to once again fall below 5%? Don’t bother. Greg McBride, senior financial analyst at Bankrate.com, says those days are gone for good. But, it doesn’t mean you’ve missed your chance to act. Last week, the average 30-year mortgage rate was still a relatively low 5.38%, according to Freddie Mac.

Also, don’t forget there’s always the risk of even higher rates in the near future. As McBride puts it, “It’s like someone sets a table in front of you with a stack of cash. You have to grab the money while it’s there.” He’s got a point. A $400,000 mortgage at 6% costs just shy of $2,400 a month. That same mortgage with 5.35% rate: $2,240 – a savings of $160 a month.

If you’re in the market to buy, prices are also in your favor. Median home values are down more than 16% compared to this time last year. Buying a house is like getting married, MacBride says, “You’ve got to be in it for the long haul and have to be ready for the financial commitment.” If you can say, “I do” on both accounts than the market may have already bottomed for you.

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Video on interest rates now.


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