Anyone bemoaning the fact that the $8,000 federal income tax credit has expired should be pleased to see today's news. The interest rates for 30-year fixed mortgages has dropped to an average 4.58%. When the tax credit expired the interest rate was closer to 5.25%. The drop of more than half a percent is a significant savings to anyone thinking of buying a home.
San Diego homes start at around $400,000. With twenty percent down on a $400,000 house, the monthly payment (including property taxes) on a 5.25% loan would be approximately $2,100. With an interest down to 4.58% the monthly payment is closer to $1,970. Obviously that $130 per month savings adds up over time.
In one year the $130 savings becomes $1,560. Consider most home owners will stay in the house for at least five years. The $130 monthly savings adds up to $7,800 over just five years.
And most home buyers today are planning to stay in their house for between five and ten years. After ten years difference of $130 per month adds up to $15,600. It starts to make the $8,000 first time home buyer tax credit pale in comparison.
So waiting to buy may not have been such a bad thing. But one thing is for certain. These low interest rates cannot last long. Mortgage rates haven't been this low since the 1950's. The wobbly global economy spurred what the Wall Street Journal called a "race for 'safe' assets" such as U.S. Treasuries. When treasury prices are pushed up, yields are pushed down, and mortgage rates fall. But when investors start moving back into equities the interest rates will rise again.
Geoffrey Schiering (J.D./M.B.A. Broker/Realtor). San Diego homes sale leader since 1999. Specializing in San Diego luxury homes transactions in La Jolla, Del Mar, Carmel Valley and Rancho Santa Fe. The Schiering Team provides world-class service to buyers and sellers of houses, condos, and investment properties throughout San Diego County. Call 619-200-7612
