Sandy Davis

Senior Loan Officer NMLS#: 172843

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Mortgage rates have hit record lows over the past few months. As a result, you may be able to afford a more expensive home than you previously thought. 

Why are Mortgage Rates so Low?

Interest rates around the globe have been dropping after this year’s events. As the global economy is slowing down due to tariffs and other factors, the interest climate has shifted downward in response.

Mortgage rates also often follow yields on the U.S. treasury debt. Typically, rates on a 30-year mortgage will follow the yield on a 10-year treasury note. 

Because of these correlations, it’s important to note that it’s unlikely a notable decline will come in the future. With current mortgage rates around 2.99%, we’re seeing a generational low and your buying power is exceptionally favorable. 

How Your Buying Power Can Rise and Fall

Over the summer, housing affordability went up for the first time since 2016. 

September brought a low of 2.875%. With this rate, you could afford a home valued at more than $400,000 while only paying around $1,600 per month- not including taxes, insurance, or any HOA fees. 

To put things in perspective, when rates were over 4.6% at the same time in 2019, that same monthly payment would have only gotten you a home priced less than $340,000.

Lower mortgage rates typically lead to a lower monthly payment. A 2% rate drop could easily add $60,000 to your budget. Because of this, with each 0.125% change in mortgage rates, your buying power can increase or decrease. 

An Increase in Buying Power

Rates are already well below what they were in recent economic booms. The decline in rates has made a large impact on the ability for buyers to afford a home at a given price. Even despite much higher property values, the declining interest rate is what keeps the power in your court.

However, it’s important to keep in mind that lower rates often lead to a decline in inventory. A reduction in the number of homes for sale will spark more competition among buyers. 

Savvy buyers will also keep in mind that the option to refinance remains if rates fall even further than they already have.