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Mortgage Rates Experience Changes: 10-Year Terms Hit Historic Low

In a recent development based on data compiled by Credible, mortgage rates for home purchases and refinancing have undergone significant changes. The latest figures, last updated on July 24, 2023, reveal interesting patterns that may impact potential borrowers.

Home Purchase Rates

For mortgage seekers, the standout feature is the historic drop in the rates for 10-year terms, which have hit a new low of 5.625%. This makes it an ideal option for those keen on maximizing interest savings. On the other hand, 30-year terms have also seen a slight dip, with rates now at 7.375%. For borrowers seeking smaller monthly payments, 30-year terms present an attractive choice. Meanwhile, 15-year and 20-year terms have remained unchanged, holding steady at 7.125% and 7.875% respectively.

Mortgage Refinance Rates

Homeowners looking to refinance their mortgages can rejoice as all key terms have seen a decrease in rates. 10-year terms experienced the most significant drop, falling by half a percentage point to 5.625%. Following closely behind, 30-year terms have also seen a quarter percentage point decline, now resting at 6.625%. Borrowers interested in reducing their monthly payments should consider opting for the 20-year term, offering lower rates compared to the 30-year term. Conversely, those looking to save the most on interest payments should explore the enticing 10-year terms at 5.625%.

The Bigger Picture

Today’s mortgage interest rates are remarkably lower than the highest recorded in history. The alarming 16.63% rate in 1981 now stands in stark contrast to the current scenario. Prior to the upheaval caused by the COVID-19 pandemic, the average rate for a 30-year fixed-rate mortgage in 2019 was 3.94%. Fast forward to 2021, and it had plummeted even further to 2.96%, marking the lowest annual average in 30 years.

The Opportunity for Homeowners

Given the historic low rates, homeowners who secured mortgages before 2020 have a golden opportunity to capitalize on significant interest savings by refinancing with the current lower rates. However, potential borrowers must consider the closing costs, such as appraisal, application, origination, and attorney’s fees, which contribute to the overall cost of the mortgage.

Understanding Mortgage Rates

Fluctuations in mortgage rates are influenced by various factors, including changing economic conditions, central bank policies, and investor sentiment. Credible, a personal finance marketplace, compiles the average mortgage rates and mortgage refinance rates based on data provided by partner lenders who compensate them. The rates are calculated on the assumption of a borrower with a 700 credit score, seeking a conventional loan for a single-family home that will serve as their primary residence. Additionally, the rates assume a down payment of 20% and no (or very low) lender credits.

Individual Variability

It’s crucial to note that the rates reported by Credible are indicative of the average rates and may vary based on individual factors. A borrower’s specific financial situation, credit history, and other factors can influence the actual rate they receive.

Locking Down Mortgage Options

For those looking to enter the housing market, it is advisable to secure mortgage options before embarking on house hunting. Being prequalified or pre-approved for a mortgage can provide an edge over other potential buyers.

In conclusion, the recent changes in mortgage rates present a unique opportunity for both homebuyers and homeowners looking to refinance. With rates hitting historic lows, careful consideration of individual financial situations and requirements can lead to substantial savings in the long run. As the housing market continues to evolve, staying informed about mortgage rates and potential fluctuations remains critical for making informed decisions.

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