A disappointing jobs report last week revealed that new jobs hit a five-year low in May. While that’s no reason for celebration, there is a silver-lining for the housing market.
It’s likely that the Federal Reserve will not raise interest rates later this month. In fact, the Fed may not raise rates for a while now, which could be a boon for home shoppers looking to lock in historically low mortgage rates.
“The real beneficiaries are people who are in the process of buying a home this spring or summer,” says Jonathan Smoke, realtor.com®’s chief economist. “They can buy more of a home with the same amount of payment, or they have an easier time qualifying” for a loan.
As of Friday, the 30-year fixed-rate mortgage averaged 3.7 percent, according to realtor.com® data. After the jobs report on Friday, lenders started coming in with much lower rates – in some cases, about an eighth of a point lower, says Matt Graham, CEO of MBS live.
Every percentage counts in mortgage rates. For example, just half a percentage point off the interest rate of a 30-year fixed-rate mortgage on a $200,000 home could equal a $56 per month savings, Graham says. Over 30 years – the lifetime of the loan – that savings could equate to thousands.
Don Frommeyer, CEO of the National Association of Mortgage Brokers, told realtor.com® that he doesn’t expect lower mortgage rates to translate into more loan applications, however. That said, more of those applications likely will be approved if mortgage rates continue to fall because interest rates influence how much borrowers have to pay each month to pay back their loans. The smaller the payments, the lower their debt-to-income ratios will be.