Mortgage rates had been expected by most economists to be higher than they are today. Instead, rates are at three-year lows for a 30-year conforming fixed-rate loan.
In 2015, 86 percent of buyers purchased their home through mortgages. So, mortgage rates were still expected to have a vast impact on what buyers will do and the stress they will undergo throughout the process. The extension of lower rates had been beneficial for most buyers who benefit from higher buying power, according to a report from Rates Spy.
Mortgage rates for this year did not just go down. In the first weeks of the year, rates declined. However, the last two weeks have seen rates go up again. The daily volatility is even more extreme with 20 down days, 20 up days, and five flat days. The average daily exchange in the 30-year fixed-rate mortgage so far is 3 basis points. One basis point is 0.01 percentage points. Should the rate fall from 3.5% to 3.47%, it will decline three basis points, or 0.03 percentage points, as posted on Nerd Wallet.
As the economy enters the peak of spring buying season, the movements of mortgage rates will be more critical. Buyers who expect for rates to remain motionless will have a rude awakening with the recent upward trend. Since Feb. 11, the 30-year fixed rate had gone up to almost 20 basis points, which translates into a decrease in buying power by over 2%.
A 10 basis-point difference on a mortgage rate, with all other factors staying the same, will produce a 1.0% difference on monthly payment. This affects not just monthly budget, but also debt-to-income ratio, which is a key factor in qualifying for mortgages.
Mortgage rates followers who have been keeping score have observed that the market has given buyers about 6% more buying power as rates decreased. But since the market has regained nearly 2% in buying power, there is now plenty of time for buying season.
