When Will Mortgage Interest Rates Go Down?

When will mortgage interest rates go down, the caller asked yesterday. Sure, he’s just doing construction across the street or maybe he lives in the neighborhood. Not really a buyer, he says. After a much longer discussion, turns out the caller is actually a vet with a VA eligibility. What he really wanted to know was is it a good time to buy a home?

But like so many other first-time home buyers today, he asked the question of when will mortgage interest rates go down. As though that is some kind of secret measurement of the gateway to homeownership.

Never. That’s my answer. Our days of historically low interest rates, oh, please dear, God, let them be over. Interest rates have been superficially suppressed for almost 10 years and are not an indicator of a strong economy.

You live long enough, you see everything. Why, in 1995, I recall feeling almost giddy that I was able to score an interest rate of 8%. Also, when making the transition in the 1970s from escrow officer to real estate agent, I saw first-hand the days of 18% to 20% interest rates.

So when rates hover around 5% today, which gets buyers fretting and wondering: when will mortgage interest rates go down, part of me says they have no idea how good they have it. It also makes me want to ask: hey, have you looked at your VISA card statement lately? Making the minimum payment, are we? How much is that interest rate?

Quentin Fottrell, personal finance editor at MarketWatch, says making minimum payments on a credit card is insane. He offers the following: “A $2,000 credit balance with an 18% annual rate, with a minimum payment of 2% of the balance, or $10, whichever is greater, would take 370 months or just over 30 years to pay off.”

Yet, you don’t hear anybody complaining about that 18% credit card interest rate. Instead, they focus on a 5% mortgage interest rate and wonder when will mortgage interest rates go down.

Further, what do borrowers have to show for paying on that 18% credit card rate? Not a house, that much I can tell you. Generally, it’s impulse purchases or depreciating items. For some borrowers, all living expenses are financed, like gas and groceries.

However, facts are prices are soft on many homes as inventory rises, which makes it a great time to buy. Our Sacramento housing trends for September 2018 show double the number of homes for sale since January. Plenty of selections. Just lock in that interest rate. Because every one-half of a percent drops your purchasing power by about $25,000. That means if you had hoped to buy a $400,000 home, you can only afford $375,000.